Who has ever written down “Start saving!” on their list of New Year’s Resolutions and ended up failing even before February came around?
Just about everyone with a pulse, that’s who.
But there’s a foolproof way to go about your personal accounting that will make things SO much simpler, even for the novice budgeter. Call it a life hack, if you will.
It’s called the “50-20-30 Rule”, and this is how it works:
It works like this: 50% of everything you earn each month should be spent on essentials.
These refer to things like your rent, public transportation fees, phone bill, and groceries. Basically, these are the things you have to spend on without fail every month, and they seldom vary.
20% of your monthly pay check should go straight into your savings.
The 20 means you have to chuck 20% of your monthly salary into your savings bin, and leave it there. This fund could be allotted for your retirement contributions or to pay off debts such as college or car loans. Hannah Lutterbach of Career Girl Daily suggests opening a separate bank account for your savings, to keep you from accessing it whenever you feel the urge to “invest in yourself”.
And 30% can be spent on things you want.
Now this is where it gets fun! The remaining 30% of your salary can be spent on, well, whatever the hell you want. Need new clothes? Sure! That pink bag catch your eye? Go grab it, sister! As long as you have paid your rent with the 50% and saved 20%, this one is completely up to you. Which is perfect because this means you can stream Netflix and order all the pizza you want without feeling sad for your pocket.
A warning for the serial overspenders, though: “It can be tempting to spend more than 30% on your ‘wants’, but try to honest and strict with yourself and don’t even start to cheat.”
According to George Charles, spokesperson for VoucherCodesPro.co.uk, the 50-20-30 Rule will make you think before you spend: “Most people would be very surprised if they tried to stick to this rule, as the majority of us spend more than we realise on frivolous items, socialising and things we want. It’s surprising how quickly the savings can mount up when you keep a closer eye on your finances.”
If you’re still having to stretch your funds every last week of the month to make it to payday, do yourself a favor. Observe the 50-20-30 Rule, and stick to it.