When it comes to budgeting, how much should you allocate to each area? A simple rule of thumb which is easy to implement is the 50/30/20 rule. It is a rule coined by Harvard Bankruptcy expert Elizabeth Warren. This rule offers a big picture view of what your budget should look like before getting into the nitty gritty.
So what does 50/30/20 stand for?
50% = Essential Expenses
30% = Lifestyle Expenses
20% = Financial Goals and Savings
The 50/30/20 rule provides a very simple but effective way to balance your budget. By following it, your income and expenses level should be relatively healthy. While they are not hard and fast figures, it is important not to deviate too far away from the guideline, especially if you are under saving. Dr Wealth provides budgeting tool to help calculate your income and expenses and that would make following the 50/30/20 rule easier. Read more…