What Is The Most Popular Saving Method?
Since way before we can remember we have been saving and spending money. Although, as many of you know, saving money is not as easy as spending it. You may have tried multiple difference saving techniques which have been recommended to you by friends and family over the years, but have you ever found the right one for you?
One of the most popular saving methods in today’s society is the 50/30/20 method. This helps us to get a good balance between all the things which we want and need in life.
What is the 50/30/20 rule?
The 50/30/20 rule is a method of saving which was created by Senator Elizabeth Warren. She wrote about this budgeting role in her book which was published in 2005. The book distinguishes a clear difference in all of the three percentages, enabling us to balance out all of our income on the correct things. The book is titled ‘All Your Worth: The Ultimate Lifetime Money Plan’.
The rules divides up your income and allocate’s it to different categories including needs, wants, and savings.
50% of your income is allocated to needs. These are things including bills, food, and other essentials that cannot be missed. Other examples are utilities, housing, and car payments. As you can tell these things are different and more important than other daily purchases or spending.
The Three Categories
Following this, 30% of your income is allocated towards the wants. These are things that we want to buy for ourselves throughout the month. Some examples are going out with friends, eating out, or even things like beauty treatments including haircuts.
Last but not least is the remaining 20%. This 20% is to be saved. Out of each wage, you should work out what 20% is so, therefore, you can save it. This way you will have money to fall back on if you ever need too. Having savings as a backup will reduce any stress if any unexpected bills or payments come along at any point. Similarly, savings are helpful if you are wanting to make any home or car improvements which you know will have a positive financial gain in the future.
Although please bear in mind that this saving method might vary in its percentages depending on your monthly or weekly income. In other words, people with a smaller income may need to spend more money on their needs than their wants. Whereas those with a larger income may be able to do the opposite and spend less on their needs than there wants. It is all based on your personal, individual income. Despite being able to change around the percentages of the needs and wants, you should not change the percentage of the savings unless you are increasing it.
This method of saving money may not work for everybody but there are plenty of other rules and structures you can follow on the Internet. Some of them you may have never heard of and others may be very basic but Work wonders.
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