For those who are unaware, the 50/30/20 budget is a concept that allows a person to budget and save their money smartly. It is a well-known method for allocating your money to different categories to achieve well-balanced finances. This plan suggests dividing your after-tax income into 3 categories – needs, wants, and savings.
50% of your after-tax income goes to your needs. Needs are the essential expenses we need for our day-to-day living. It includes:
- Rent or mortgage
- Utilities
- Food and groceries
- Transportation costs
- Insurance
- Debt payments
- Eating out
- Entertainment
- Traveling
- Shopping
- Personal care
- Subscriptions
- Emergency funds
- Investments