Managing finances according to the 50/20/30 method

Managing finance according to the 50/20/30 method

Managing finance is an important skill that everyone should have. Savings is an aspect that is often overlooked in financial management. In particular, you can manage your monthly finances according to the 50/30/20 principle so that you can save for your most urgent needs and severance pay. The principles of 50/30/20 were introduced in the book “All Your Worth: The Ultimate Lifetime Money Plan” by Senator Elizabeth Warren and his daughter Amelia Warren Tiagi. The basic rule is to split your after-tax income to secure 50% for your needs, 30% for your needs and  20% for your savings. This is how the 50/30/20 principle works.

Managing finance according to the 50/20/30 method

The 50/30/20 principle works as follows:

1. Calculate monthly income.

Add up the amount you deposit in your bank account each month. Paying the estimated tax will reduce your monthly income.

2. Calculate the spending threshold for each category

Multiply your salary by 0.50 (for needs), 0.30 (if you want), and 0.20 (for financial goals) to see how much you should spend in each category. 50%: The goods are the invoices you absolutely have to pay and are necessary to survive. This includes rent, grocery, insurance, medical care, minimum debt payments, and utility bill payments. 30 percent: Want Wishes are basically all the little extras you spend on money to make life more interesting and interesting. This includes tickets for dinners and movies, sporting events, vacations, bags and the latest electronics. 20%: Savings Includes emergency funds, entry into investment funds, or savings in the stock market. You should have at least three months of emergency savings in case you lose your job or something unexpected happens.

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3. Plan your budget based on your spending thresholds.

List and calculate your monthly costs for each category to see if your costs are lower than the monthly goal you set in the previous step.

4. Monitor your budget

Track your monthly spending and make changes as needed to stay within future spending thresholds.

Track your monthly spending to meet future spending thresholds!

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