Friday, May 4, 2012

A Guide to Budgeting: The 50/20/30 Rule

I am reposting the article "5 Financial Rules to Live By" which is based on a TED talk given by LearnVest cofounder Alexa von Tobel. LearnVest  is a website that provides free financial planning tools for women anywhere in the financial spectrum, from recent graduate to in deep debt (maybe both?).

I thought the most useful advice was the 50/20/30 rule for budgeting:
  • 50% of take-home pay goes toward your essentials (housing, utilities, transportation and groceries)
  • 20% to debt repayment and future savings
  • 30% to everything else
It's simple and easy to remember. Putting 20% towards debt repayment is a good chunk of change, and if you can put some of the 30% miscellaneous spending towards an emergency saving fund, you will have the security of 6 months worth of income in case anything happens to your job.

Why not plan your budget for the next 3 months using it?


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