If you’re reading this, it’s probably because you’re a young adult who struggles with keeping track of your money. That being said, we know it isn’t easy to have a handle on your personal finances and continually monitor your spending habits. It can be difficult to remember all the things you need to do with your money on a day-to-day basis, but thankfully there are specific strategies that can help you get on track with your spending and saving. This article goes over the 50/30/20 rule for budgeting and how it can help you turn your money into savings. Read on for more details about this helpful guide to personal finance!

What is the 50/30/20 Rule?

The 50/30/20 rule for budgeting is a helpful guide for prioritizing your spending. By following this budgeting rule, you can avoid racking up credit card debt and live a more financially stable life. This budgeting rule divides your income into three categories: essentials, pleasures, and savings. The percentages for each of these categories can vary depending on your individual financial situation and lifestyle, but in general the 50/30/20 rule is a helpful guide to keeping track of your spending.

How Does the 50/30/20 Rule Help You Turn Your Money Into Savings?

The 50/30/20 rule is designed to ensure that a portion of your income is being set aside for savings each month. You can use this money to invest in yourself and your future by putting it towards things like retirement or a down payment on a house. This rule also helps you avoid spending too much money on unnecessary fun things. The 30% of your income that you dedicate towards pleasures helps you avoid overspending and getting yourself into debt.

50% of your income should go to essentials

Essentials include expenses such as rent, utilities, and groceries. These are things that you cannot survive without, and it is crucial to make sure these expenses are being paid on time and in full each month. Your rent or mortgage payment is one of the biggest expenses of your life, so it is crucial that you have enough money to cover it each month. Likewise, your utilities such as water and electricity are necessary for day-to-day life, so you will need to make sure to have enough money to pay for them. Your grocery expenses are often overlooked and forgotten, but they are an essential part of your monthly spending and should be accounted for accordingly.

30% of your income should go to pleasures

This is the category where you can give yourself a little room to spend money on things like eating out and going on weekend getaways. It is important to remember that you should only be spending money on these things if you have enough left over to pay your essential expenses. These should be considered indulgences, and you can make them a part of your budget if you are using a budgeting app to keep track of your spending.

20% of your income should be set aside for savings

This is where you can start actively saving money for big purchases and investments such as retirement or a down payment on a house. This is not money that you should be spending on pleasures or essentials. Instead, it should be sitting in a savings account until you find a good investment opportunity or a future purchase that you need to save for.

Bottom line

The 50/30/20 rule is a helpful guide that can help you manage your personal finances. By following this rule, you can make sure to allocate the right amount of money towards your essential expenses, your pleasures, and your savings.