It might even convince the most stubborn anti-budgeters to give it a try. However, the main advantage of the 50/20/30 approach is that it’s clear and straightforward. Of course, this isn’t the only way to create a family budget. That’s it! This is the simple formula for how to make a budget you can live with. Add it up: 50 + 20 + 30 = 100% balanced family budget Putting money toward some Wants may make it easier to resist “budget fatigue” and throwing away the monthly budget altogether. And if you spend less than 30% on Wants, go back and make sure the Needs and Savings buckets aren’t too big. Spending more than 30% on Wants? It’s the same drill: Look for creative ways to cut costs. After-school activities for kids, including travel sportsĬalculate 30% Wants Using an after-tax income of $3,000, your Wants budget is $900. Exercise, such as gym memberships or yoga classes.Entertainment, like downloading movies and music.Restaurant food, from eating out to getting coffee from the corner café.The Wants budget bucket includes expenses for all the “extras”: It’s OK to budget for fun stuff? Absolutely! Leaving a little room in the family budget for enjoyable things can keep everyone from feeling deprived. Consider putting Savings money in an easy-access savings account. Get tips on saving money fast and building an emergency fund. Putting less than 20% into Savings? Free up more money by trimming expenses in the Needs and Wants buckets. Other savings goals (vacation, wedding, home improvements)Ĭalculate 20% Savings If your monthly, after-tax income is $3,000, your Savings budget is $600.Credit cards, student loans and other non-mortgage debt payments.Here’s what’s included in the Savings budget bucket: After paying off student loans, credit cards or car loan, you can redirect that same money into a savings account. Keep in mind that debt payments (other than a mortgage) are also included in the 20% savings percentage. Having money in savings means you’re less likely to go into debt to afford a big-ticket item or pay for an unforeseen expense. Savings are an important part of any balanced monthly budget. Get ideas for cutting costs on food, utilities, insurance or commuting. Why? Putting too much money into your Needs category could mean you run short of money for Savings and Wants. Spending more than 50% on Needs? Consider trimming some fixed costs. Monthly income ($3,000) x 0.50 ( 50%) = $1,500 (target Needs budget)Ī good goal, then, would be to spend no more than $1,500 per month, or 50% of your available monthly budget, on required expenses. For example, if your after-tax income is $3,000, your Needs budget is $1,500.
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