Managing Finance with 50/30/20 Budgeting Method

What Does 50 30 20 Represent in Terms of Budgeting?

      If you are aware of the importance of budgeting or are looking to learn more about financial management, you need to know the 50/30/20 method. Many reviews recommend following this method of budgeting. But how effective are these methods?

The 50/30/20 method is a monthly personal budgeting method that divides funds into three categories: needs, wants, and savings.

The numbers 50, 30, and 20 represent the percentage of funds that must be allocated to the three categories:

If you are aware of the importance of budgeting or are looking to learn more about financial management, you need to know the 50/30/20 method. Many reviews suggest following this budgeting method. But how effective is this method?

The 50/30/20 method is a monthly personal budgeting method that divides funds into three categories: needs, wants, and savings. (thebalancemoney.com)

The numbers 50, 30, and 20 represent the percentage of funds that must be allocated to the three categories:.

- 50% for needs, including mortgage, daily shopping, utilities, and others.

- 30% for desires, for example: traveling, hangout, café

- 20% for savings, eg savings, investments or credit cards.

Managing expenses is not an easy matter, especially for those of you who are married and have children, of course it is a bit difficult to fully record where your expenses are.

For young people who are still single, impulsive purchases and hobbies can also make funds more difficult to manage. With the 50/30/20 method, you still have to keep your budget in check. But, at least you can have a general idea of your financial situation, and not worry about the allocation being unbalanced.

The point is, knowing the proportion of your income and expenses can make it easier to stay on budget, for example: there will be no cases of being late paying the rent because the funds are accidentally used while traveling, because they use fund allocations from different categories.

This method can help you, especially those who have multiple sources of income as well as expenses. Categorization can make it easier, because you can focus on managing each type of expenditure individually. You could say this method is not a random method, because it is the result of 20 years of research by one of the United States Senators.

However, the 50/30/20 method may not be suitable for everyone's situation. For example, the allocation of 50% of your needs may be too little even though you are still single, when you are in the early stages of your career, but are forced to live in a strategic area of ​​the Capital City. The cost of renting housing is high, the prices of goods are also high. On the other hand, 30% of the allocation for desires can also be considered too big, when you are well-established, have a family, and have a high income level, so it tends to encourage waste.

In the end, the 50/30/20 method can be a basic benchmark that you can follow when budgeting, but you still have to make adjustments to your budget based on your situation, needs and lifestyle.

It could be that the rule that suits you is more like 60/20/20, 50/20/30, or even with a unique number of categories like 50/30/10/10 or 80/20. Everything is in your hands and how well you know your own situation.