The 50/30/30 budget rule was popularized by Senator Elizabeth Warren in her book, All Your Worth: The Ultimate Lifetime Money Plan. This rule suggests that after income taxes, you should divide your paycheck in the following way:
50% spent on needs
30% spent on wants
20% put into savings
While this method isn’t always feasible, it is a good rule to work toward.
50% On Needs
In this case, needs would be considered expenses, such as mortgage payments, rent, utilities and healthcare. These are the expenses that are absolutely essential and paying for them should come first. If you are spending more on needs than you are making, you may need to consider different budgeting techniques or changes in your life.
30% On Wants
Wants are expenses such as your cable bill, music subscriptions, nights out, etc. These are things and services that you don’t necessarily need, but really want. The 50/30/20 rule suggests that you use 30% of your paychecks on these things.
20% Into Savings
Sometimes it can be difficult to think about saving for the future when there are many expenses to think about now. However, since savings accounts accrue interest, it’s important to move money in your savings account to prepare for the future. It is also suggested that you use this 20% to help pay down loans and credit card debt. You can also choose to split this 20% into different accounts including, but not limited to, savings accounts, retirement accounts or mutual accounts. Your future self will thank you.
How DailyPay Can Help
There are two ways that DailyPay can help you follow the 50/30/20 rule — with PAY and SAVE.
PAY allows you to access your earned pay before payday, so you never have to worry about missing a bill due date because it’s due between paychecks. With PAY, you won’t have to worry about including overdraft fees, late fees or interest charges in your expenses.
SAVE lets you move your earned income from your available Pay Balance to your savings account quickly and easily. You can set up automatic savings so that going forward, you don’t ever have to remember to save!
Budgeting can be difficult and daunting, but the 50/30/20 rule is a good rule of thumb and DailyPay can help you follow it.
Looking for more financial wellness tips? Check out some of our other financial wellness resources.