Creating a Budget 101: Master the 50-30-20 Rule Using a Budget Planner
At CalendarBudget, we know how hard it is to plan a budget and stick to it, which is why we offer solutions like our budget planner app. However, if you’re struggling to get your money in order, there are a few things you can do, like setting up a 50-30-20 budget. Let’s make it simple for you to eliminate your struggles. We’ll take it a step at a time. Let’s get you started.
Step 1: Calculate Your After-Tax Income
The first step in creating a 50-30-20 budget is calculating your after-tax income. This amount is what’s leftover after your employer deducts taxes, as well as medical (ex Medicare) and pension plan (aka Social Security payments). It’s the money you get to put into your pocket/bank account.
Step 2: Clearly Define Your Needs & Wants
After determining your after-tax income, it’s time to set aside money for your needs and wants. Needs are things like your rent or mortgage payment, auto loan, other transportation costs, utility bills, cell phone bills, food, clothes, and other essentials. These “needs” should be covered by 50% or less of your after-tax income. This is the perfect time to identify expenses that can be trimmed or eliminated, such as overspending on food or eating out, etc. It helps to see the big picture like on the calendar view and category budgets in your budget plan.
Step 3: The “Wants” Get 30%
Once you’ve set aside all of the income you’ll need to pay bills and keep up with the daily necessities, it’s time to set aside some of that after-tax income for the things you want. These can be anything from planning your next family vacation to going out to eat, buying new technological gadgets and toys, or hitting the spa once a month.
Step 4: Use the Remaining 20% for Savings
After setting aside money for those wants and needs, it’s time to save the rest of your after-tax income. A portion of this can go towards paying down existing debt as well. The best way to increase your savings amount is to pay off that debt as quickly as possible to avoid incurring interest. Once you’ve done so, you’ll have more to set aside for retirement or your rainy day fund.
Contact us for more about the advantages of a budget planner!
By using a budget planner, you can evaluate any changes you need to make to your expenses, as well as calculate how much you’ll need for retirement and much more. Visit us here for a FREE demo of CalendarBudget’s innovative budgeting app, or sign up online today!