A short note to clarify a bit more on the 50-30-20 rule:
The percentages are meant to be thresholds, or guidelines--don't freak out if you find your breakdown to be closer to 70-30-0 or 70-40-0 or even 50-50-0 (however if your breakdown is 70-40-0 you are spending 110% of your income!). 50-30-20 is more of a benchmark, or like the lines on the road--if you cross over the white line a bit your car isn't going to instantly explode (imagine if it did!).
The most important of the three is definitely the "Wants" portion. Like I mentioned in the previous post, I would caution you to maintain a level of no more than thirty percent of your income going to this category--the one exception would be if you have no debt, in which case forty percent is the ceiling I would suggest.
So what about the "Needs"?
There is no "magic" number, but keeping your "Needs" below fifty percent of your income is a good rule of thumb; however I know sometimes it may seem that you are barely meeting your needs. Again, don't freak out if your needs are closer to sixty/sixty-five percent of your income; chances are you can look at ways of reducing this or reducing your "Wants" until you improve this category (i.e. pay off a credit card or student/car loan--your "Debt" portion should be helping with this).
Where I would suggest you seek some serious guidance is if your "Needs" exceed say seventy-five/eighty percent of your income--in which case it may be time to make some difficult decisions (i.e. move to a place with lower rent or get a second job).
Finally, the "Debt" portion. I know twenty percent seems like a lot, but the results are worth it. While you may not be able to devote the full twenty percent to start, if I were you I would not sacrifice this in order to prop up my "Wants"--meaning if your "Wants" are forty percent and your "Needs" are sixty percent, worry more about cutting ten percent from your "Wants" than from your "Needs".
By the same token, if your "Needs" are fifty percent and your "Wants" are fifty percent, try to cut the entire twenty percent for "Debt" from "Wants"--or ten percent for "Savings" (remember, once you have no debt this plan can be modified to the 50-40-10/Needs-Wants-Savings plan).
Au Revoir for now, and Good Luck!
The percentages are meant to be thresholds, or guidelines--don't freak out if you find your breakdown to be closer to 70-30-0 or 70-40-0 or even 50-50-0 (however if your breakdown is 70-40-0 you are spending 110% of your income!). 50-30-20 is more of a benchmark, or like the lines on the road--if you cross over the white line a bit your car isn't going to instantly explode (imagine if it did!).
The most important of the three is definitely the "Wants" portion. Like I mentioned in the previous post, I would caution you to maintain a level of no more than thirty percent of your income going to this category--the one exception would be if you have no debt, in which case forty percent is the ceiling I would suggest.
So what about the "Needs"?
There is no "magic" number, but keeping your "Needs" below fifty percent of your income is a good rule of thumb; however I know sometimes it may seem that you are barely meeting your needs. Again, don't freak out if your needs are closer to sixty/sixty-five percent of your income; chances are you can look at ways of reducing this or reducing your "Wants" until you improve this category (i.e. pay off a credit card or student/car loan--your "Debt" portion should be helping with this).
Where I would suggest you seek some serious guidance is if your "Needs" exceed say seventy-five/eighty percent of your income--in which case it may be time to make some difficult decisions (i.e. move to a place with lower rent or get a second job).
Finally, the "Debt" portion. I know twenty percent seems like a lot, but the results are worth it. While you may not be able to devote the full twenty percent to start, if I were you I would not sacrifice this in order to prop up my "Wants"--meaning if your "Wants" are forty percent and your "Needs" are sixty percent, worry more about cutting ten percent from your "Wants" than from your "Needs".
By the same token, if your "Needs" are fifty percent and your "Wants" are fifty percent, try to cut the entire twenty percent for "Debt" from "Wants"--or ten percent for "Savings" (remember, once you have no debt this plan can be modified to the 50-40-10/Needs-Wants-Savings plan).
Au Revoir for now, and Good Luck!
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