Our approach to handling a windfall is a simple and easy way to manage what you spend and save and can help you to do the best you can when you have additional funds available.
The most important thing for every person is financial planning and money control so in that we need to focus on some control method , in thats this below budget rule also gives the lot of benifits to every one who is follow this rule.

What is the 50/30/20 budget rule?

Key takeaways

• If you’re looking to gain greater financial control and confidence, there’s never been a better time to check out the 50/30/20 budget.
• Budgeting doesn’t have to be time consuming or complicated. Try out the 50/30/20 budget calculator!
• With the 50/30/20 budget, your monthly after-tax income is divided up into just three simple financial categories.

If you’re new to budgeting, figuring out how to manage your money can feel overwhelming. Not only do you need to organize your income and expenses, you also have to make difficult decisions about how to spend your cash. A good way to keep it simple is to consider using a percentage-based budget that divides up your monthly after-tax income into categories. One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.
Learn more about the 50/30/20 budget rule and if it’s right for you.

Budget 50% for necessities

Needs are those expenses that you absolutely must pay and what’s necessary for survival. These expenses can include rent or mortgage, car payments, groceries, insurance, health care, credit card payments, student loans and utilities. Look on the bright side though; once some of these are paid down your budget can always be reworked to include more for “wants” or “savings.”

Budget 30% for wants

Optional expenses, or “wants,” should account for 30% of your income. While you may have strong opinions on what constitutes a want as opposed to a need, a want could be anything from taking the subway instead of walking to work (assuming work is close to your home), weekly nights out with friends at expensive restaurants or subscriptions to several streaming services at once. In the grand scheme of things, these purchases may be important to you, but they are optional costs.
To avoid overspending on this category, consider meeting friends for lunch instead of dinner when the prices are (usually) lower, or better yet, cooking a meal at home. Love your Pilates studio? Consider lower-priced options, such as working out at home via an app. However, just remember there’s no judgement for what your individual wants are. And be careful when it comes to the word “upgrade.” We all want a better experience, but often upgrading a phone plan, vacation package, or even your closet can put a dent in your savings. If you want a new suit or dress for an event, consider rental services that allow you to borrow and return clothing for a fraction of the price of buying new.

Budget 20% for savings

The remaining 20% of your income should go toward saving money. We get it — 20% can be tough, especially during times when inflation is on the rise. However, that’s why using the 50/30/20 Budget Rule can be so helpful. By bringing more awareness to how you spend money, you can discover opportunities to cut expenses and save more. Opening a deposit account to save for a down payment, vacation or any other larger goal would all fall within the savings category. It could also mean contributing to an investment account or a retirement account, like a 401(k) or IRA.
Also, consider an emergency fund. Whether that’s part of your regular savings account or means opening a second savings account, an emergency fund is exactly how it sounds — money allocated as a buffer for unexpected expenses such as medical bills, your car breaking down, or a layoff.
You may also want to think about taking an extra savings step by using “round up” programs online or with mobile apps that take your debit card transactions, round them to the nearest dollar, and automatically transfer the “change” to your savings. You can also set up direct deposit, so that a portion of your paycheck goes right into your savings account.

Is the 50/30/20 budget rule right for you?

The 50/30/20 Rule can be a good budgeting method for some, but whether the system is right for you will be determined by your unique monthly expenses. Depending on your income and where you live, earmarking 50% of your income toward your needs may not be enough. For example, people who live in a high-cost area may have to put a large part of their income toward housing, making it almost impossible for them to keep their needs under 50%. So you may need to adjust the percentages to fit your situation.
Having three categories to track might help prevent you from getting bogged down in the process of categorizing each individual expense. For others, the lack of detail could make it harder to find ways to improve their spending habits. Be kind to yourself. If you’re not hitting the budget rule numbers exactly, things may change for you down the road when you’ve paid off your student loans, perhaps. Then you can allocate more of your monthly budget for savings.
Ultimately, you need to decide what type of budgeting system is right for you based on your habits and circumstances. Luckily, there are simple resources like the calculator below that you can use to figure how much green goes in each of your buckets.

What to remember

The 50/30/20 budget can be a simple and effective way to structure finances. To get started, take a look at your financial situation and goals, and come up with a formula that works for you. Whatever budgeting method you choose, it will only work if you stick to it. However, don’t forget to be kind to yourself if once in a while a “want” sneaks in and your budget numbers aren’t perfect for a month. It’s all about finding that balance of making sure you prioritize what’s most important that will help you down the road with larger savings goals.

Ready to tackle your financial goals?

Wherever you are in your financial journey, Citizens is here to help – with banking that stands with you and grows with you. With automatic transfers from your checking to your savings account, you can set money aside and watch your savings add up. And with Citizens iQ™, you can stay on top of your finances with personalized spending and saving insights in our mobile app.