Budgets are more than just paying your bills on time—a budget is also about determining how much you should be spending, and on what. The 50/20/30 rule, also called the 50/30/20 budget, is a proportional guideline that can help you keep your spending in alignment with your savings goals.
Adults—especially young adults just starting out in life—can benefit greatly by following the simple principles set forth by this budgeting system. When you know how to achieve a balanced budget, you can take the next steps to further customize this rule around your own unique expenses and goals. Novae has the tools and resources to help you reach these goals.
The 50/20/30 rule can help twentysomethings start sorting out the complicated world of personal finance. Make an effort to get into this habit, and budgeting will be a far simpler task throughout your life. Sure, you can make adjustments with a tweak here and a nudge there, but by staying close to the core concept of this budgeting system, you’re guaranteed to gain financial ground, rather than lose it.
50% of Your Income – Essentials
To begin abiding by this rule, set aside no more than half of your income for the
absolute necessities in your life. This might seem like a high percentage (and, at 50 percent, it is), but once you consider everything that falls into this category it begins to make a bit more sense.
To be clear, your essential expenses are those you would almost certainly have to pay, regardless of where you lived, where you worked, or what your future plans happen to include. In general, these expenses are nearly the same for everyone and include housing, food, transportation costs and utility bills. The percentage lets you adjust, while still maintaining a sound, balanced budget. And remember, it’s more about the total sum than individual costs. For instance, some people live in high-rent areas, yet can walk to work, while others enjoy much lower housing costs, but transportation is far more expensive.
**Novae Money Financial Education
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