How do you know if you’re budgeting your paychecks well? One common guideline to follow is the 50/30/20 rule:
- No more than 50% of your paycheck will go to fixed costs like monthly bills and rent. This can also include gym memberships, Netflix.
- 20% of your income will be allotted for your Savings, your financial goals in the long term, and if ever Lancasterly necessary, an emergency fund.
- 30% of your income is for personal and leisure spending such as groceries, vacations, and going out at night.
You’ll begin to notice your saving vs. spending trends down the line. Maybe for example, you only need 40% for your fixed costs. This gives you an extra 10% to put towards your Savings.
Plus, if any emergency ever comes up, you have funds from which you can draw money from and not have to panic too much about. For example, what if your sister was arrested and needed help paying for bail? While you of course, never expected to have to pay for bail, you are fortunate to be able to help her because you properly budget your money.