The 50/20/30 rule of saving

I’ve read about the 50/20/30 plan. Seemingly if you could live this way then your life would be a lot less stressful. Obviously this does not work for everyone but I’m going to try this one out.

I’ve done about a million budgets in my life time and have completed 0… This plan removes the million of different expenditure you would usually get fed up of writing. Well I get fed up writing I’m going to do this to a budget of someone earning €1000 a months because it’s a nice round number.

The 50/20/30 plan fits all expenditure (money going out) into 3 main categories and in order of importance so I’ll start..

The 50/20/30 Rule Broken Down
The 50/20/30 Rule is easy because instead of telling you how to break down your budget across 20 or more different categories (who could possibly keep track of that?), it splits everything into three main categories:

1. Essential Expenses €500
No more than 50% of your take-home pay should go toward Essential Expenses, which are the expenses you need in order to maintain the fundamentals of your life: shelter, food, heat, etc. Only four expenses go in this category: housing, transportation, utilities and groceries.

2. Financial Priorities €200
At least 20% of your take-home pay goes to Financial Priorities, which are the goals that are essential to a strong financial foundation. These include your retirement contributions, savings contributions and debt payments, if you have debt.

You should make these contributions and payments after you pay your Essential Expenses, but before you do any other spending.

3. Lifestyle Choices €300
No more than 30% of your take-home pay should go to Lifestyle Choices, which are personal, voluntary and often fun choices about how you spend your discretionary income. They often include cable, internet and phone plans, charitable giving, childcare, entertainment, gym fees, hobbies, pets, personal care, restaurants, bars, shopping and other miscellaneous expenses.

About these ads