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The 50/20/30 Budget For Modern Life

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Dec. 20 2017, Published 10:03 a.m. ET

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Making a budget isn’t only about ensuring that you pay your bills on time every month; it also helps to give you a clear outline of what you should be spending on different items. Though there are plenty of different spending plans that you can try out, a good budget to follow for modern life is the 50/20/30 one. It is relatively simple but it has also proven to be effective for many people. So, let’s look in more detail at this budgeting system to see if it is something that you would like to adopt in your life.

50% on Essentials

The 50 in the rule refers to essentials, so you should be looking on spending no more than half of your salary on these things. You may think that this seems like a high figure, but it actually encompasses a lot of different things. The biggest of these is your accommodation costs, though there are plenty of other large expenditures out there including food, utility bills and transportation costs. Just because they are essentials, it doesn’t mean that you can’t lower the costs. For example, you could eat at home more often rather than ordering take aways and switch your energy supplier to get a better deal.

20% on Savings

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After you have taken care of your essentials, the next 20 percent should be put away into savings. This doesn’t mean that it all has to be channeled into a single account; you also need to think about clearing your debts and diversifying your income as much as possible. Tackling any debt that you have outstanding should be your first priority as this is what is going to cause you the most damage in the long run. Though you be nowhere near a stage of life when you are thinking about retirement, there are numerous advantages to starting saving early as you will start compounding the interest and find yourself in a more comfortable position as the years go by.

30% on Personal Expenses

The final 30 percent of this simple budgeting scheme is for any personal expenses that you have that contribute towards the comfortable and happy running of your life. Again, this is a broad category which takes in everything from your monthly Netflix subscription to your daily cup of coffee. When times get tough, this is the category that you can do most of your budget trimming from, whether you search for good deals on eBay or start making your lunch to bring into work every day. Of course, you should treat 30% as a maximum amount to spend rather than a target that you need to be hitting.

There you have a budget which is simple to follow and fits in with modern life. Once you establish a spending plan, you should try to stick with it as closely as you can so you can enjoy a more financially comfortable life.

[Editor’s note: This post is produced by one of our trusted partners.]

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