The exact percentages for each category depend on your personal financial situation, local cost of living, inflation, and many other factors. However, the 50/30/20 rule should only be used as a rule of thumb for budget planning. And with only three major categories to track, you can save yourself the time and stress of digging into the details every time you spend. The basic rule of thumb is to divide your monthly after-tax income into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt.īy regularly keeping your expenses balanced across these main spending areas, you can put your money to work more efficiently. Sometimes even a combination of both methods can be a reasonable and right choice.The 50/30/20 rule is an easy budgeting method that can help you to manage your money effectively, simply and sustainably. There is no right or wrong answer here, just pick the method that fits your particular debt situation. Dave Ramsey is suggesting using a debt snowball method in all cases, but I will offer to consider the debt avalanche method as well. “While, again, no percentage is suggested, suggests to throw everything you can at this super important money goal. “The article ends with the debt category, and suggests allocating the money you are able to save on your spending and from boosted income toward paying off your debt,” Kayikchyan said. “These categories are places to prioritize cutting your budget, especially on your way to building financial security and stability.” Debtĭebt is a burden for almost all of us, so it’s critical to make ample room in your budget to tackle it. “For miscellaneous categories about 5% of your take-home pay is recommended,” Kayikchyan said. The blog highlights that the average American household spends $3,568 a year here, or about $297 a month. Here’s where you can (like it or not) look to cut back. Lifestyle or entertainment, personal spending money and miscellaneous are the next categories discussed. Make Your Money Work for You Lifestyle or Entertainment, Personal Spending and Miscellaneous This will be a good strategy for someone who is using food or grocery delivery services.” But in reality, preparing meals at home versus eating out will save you some good money. For the food category, buying in bulk, couponing and chasing deals is one way to save. “Food, along with housing and transportation, is considered the largest item in the household budget. “While there are no set percentages offered here, the article gives some national averages of what Americans spend on groceries each month: singles age 19-50 spend $314 to $337, couples age 19-50 spend around $685 and families of four spend around $971,” Kayikchyan said. The next budget category discussed in the Ramsey Solutions article is food, and surely we all need that! But food prices have risen at the highest rate we’ve seen in decades. “While this can sound a little controversial and opposed to the ‘pay yourself first’ budgeting method, the article emphasizes giving as a great act and being good for everyone, and recommends giving 10% of income,” Kayikchyan said. Charity is an important part of the human experience, and many people want to allot for it in their budgets.
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