If you’ve been tracking your spending, know where your money has been going, but are wondering where your budget is lacking, this one’s for you.
Enter the 50/30/20 rule.
This budgeting guideline divides your take home pay into three categories with 50% going to your essential needs, 30% for discretionary spending, and 20% into savings.
Ready, set, budget
The needs category includes your necessities like housing, food, utilities, and health care, as well as payments on things such as student loans, car loans, and your credit card.
The wants category includes expenses like gym memberships, dining out, travel, and entertainment. It’s essentially the spending you could trim if you needed to free up some cash.
While the savings portion of this budget is the smallest, it’s still very important. Committing 20% of your income to things like your retirement account, emergency fund, or savings for a down payment for a home can make the difference in your financial security.
Keep in mind that this isn’t a hard rule, but rather a budgeting guideline. For instance, if you live in an expensive city, you might need a larger share of your income to cover your housing costs.
If you’re ready to amp up your money, a SoFi Checking and Savings account can help. We make it easy to open an online bank account and — if you sign up for direct deposit — you’ll earn a competitive APY on a qualifying account.
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