Savings: the '50-20-30' method to easily save without realizing it

Have you always struggled to make ends meet at the end of the month? The “50-20-30” rule will help you save better.

Are you tired of finishing penniless at the end of the month? Have the Christmas and New Year holidays emptied your pockets? people less fortunate than you seem to be doing better and even save money . You can do the same by starting to manage your money better. The technique that you will discover in a few lines will help you spend better. It's a method applied by the most emblematic figures of financial intelligence . The details.

Savings: how does the 50-20-30 method work?

The 50-20-30 rule is a method that allows you to better distribute your expenses . Its purpose is to build a budget balanced and savings.

It is a method that proven to save money . It is mentioned in the book All Your Worth: The Ultimate Lifetime Money by US Senator Elisabeth Warren. The technique is divided into three categories .

50% for fixed needs

Needs create essential and mandatory expenses . These include: food, rent, transportation costs, tax and credit refunds, insurance, telephone charges, etc. Half of your resources should be given to him .

20% for savings

This 20% of your income will be paid into your savings . It can fuel the goals that are important to you (the purchase of a new car, a move in sight, a vacation plan, etc.).

But this percentage can also constitute precautionary savings . So keep this amount well. His savings could save your life in the event of a disaster.

30% for cravings

After setting aside 70% of your income, the remaining 30% will constitute the expenses for your small desires . They are in fact superfluous not so essential. It's your Netflix subscription, your dining out, that weekday brunch, the overpriced coffee every morning or your shopping trips .

'If you have to wonder why you need it, it's probably more of a craving,' Marie Claire said. These are small luxuries that give pleasure and that we could well do without.

How to apply the 50-20-30 method to save money?

To implement the 50-20-30 rule, you must assess the amount of your financial resources available for the month. Consider your salary, your helpers, your benefits or the pensions that you receive monthly .

Done a list of all your fixed expenses and add them up . In general, these are your rent, your food expenses, the repayment of the mortgage, your various charges (internet, gas, water, insurance, electricity, etc.). It may be that after your calculations, the fixed expenses (needs) exceed 50%. But in most cases, part of the latter can be reconsidered . After reflection, if you can postpone or even cancel them, it means that they are not essential.

After determining this amount, you can now distribute the rest in savings and in your desires. As much as possible, try to keep the ratio 20% and 30% for the latter.

As soon as you know the monthly amount allocated to each category, you can start saving money . Sometimes, you can have fun , without running the risk of going over your budget.

What you need to know before using the 50-20-30 method

The 50-20-30 method works and can save you a lot of money . The followers of this method have set up a regular transfer in order to compose a reserve available in case of contingencies .

This rule offers an ideal balance of expenses. According to profits, its application may take a little longer . Depending on the situation, this can even become 40-30-30.

But before embarking on this technique, be aware that this rule can be quite complicated if you have a low income . According to Forbes, it is quite difficult to apply if the area where you live has a high cost.

50% of your income may already be allocated to your rent. In some households, saving money is almost an impossible mission. But do not be discouraged . According to Forbes,

“That’s not to say this method of budgeting isn’t useful. Breaking down the amounts by category can help you identify areas where you are overspending. You might find that you are spending too much on memberships or dining out and so make adjustments.”

Source : Huffingtonpost