Learn How The 50/30/20 Budget Can Help Manage Your Finances
When it comes to budgeting, adopting the 50/30/20 budget can help make managing money easy. This budgeting method is popular for its simplicity and other benefits, making it a preferred choice among novices and experts alike that needs to either start or change their budgeting methods.
The best part is it isn’t difficult to implement for your finances right now! Keep reading this article to learn what you need to know about this budgeting approach so you can decide if it’s for you.
How Does The 50/30/20 Budget Work?
There are plenty of different budgeting methods in personal finance that can help you out, and the 50/30/20 budget is one of the more popular ones to use. In a nutshell, this budgeting approach means dividing your budget into three categories, each accounting for 50%, 30%, and 20% of your money, respectively. Those differently sized portions have specific purposes, which are:
- 50% for needs: Half of your money will be set aside for the things you can’t live without like food, rent, and bills. This accounts for most of your money when you follow this budgeting approach.
- 30% for wants: A third of your money in this budget will go towards what you desire but can ultimately live without. Entertainment and hobbies are two examples of items that fall within this category.
- 20% for savings: Lastly, 20% of your money will go towards savings, investments, and paying debt. These are things that can help your money grow naturally and help you get on the right path.
What Are The Advantages Of The 50/30/20 Budget?
Thanks to this budgeting method’s unique advantages, the 50/30/20 budget continues to be one of the most popular budgeting approaches for people to use. But what exactly are the advantages of using this budgeting method that make it so popular? Can it actually help you out? Well, keep reading to learn more about any advantage you can get.
1. Simplicity
One of the biggest reasons this budget approach is popular is its simplicity. You don’t have to know too much about finances and budgeting in order to use this method. In fact, you only need to divide your money into three broad categories instead of overcomplicating the process.
That means a first-time budgeter can adopt this method quickly. Even experienced budgeters can stay on top of their finances without much effort or stress.
2. Balanced
The 50/30/20 budget is also helpful to keep a good balance between the different categories. That means you won’t have to worry about setting aside too much money for one part of your expenses while neglecting the others.
Having these set numbers makes sure you are spending – or saving – the appropriate amount on each category. And if you ever have to add anything to a category, this budget allows you to stay in balance.
3. Helps Prioritize Needs Vs Wants
Two of the largest categories in this budgeting approach are your needs and wants. Grouping your expenses this way makes you think clearly about whether or not something is a necessity (i.e. a need) or something you could live without (i.e. a want).
This allows you to stay accountable because you really need to think before you put something into a category – after all, you do want to make sure you stay in a good balance with your budgeting approach.
4. Adaptable
The simplicity of this approach also makes it easy to adapt to changes in your finances. We all know our finances don’t always stay the way that they are. Maybe you’ll experience a pay increase or even a decrease in your paycheck.
Whatever the case, you will need an adaptable budget that will allow you to make any necessary changes. That is exactly what you get with the 50/30/20 budget. It’ll still work well for you even if your monthly income fluctuates.
5. Creates Awareness
The three categories of the 50/30/20 budget also help you understand where your money goes each month. Having these set percentages for each category may show you how you’ve been spending too much on one category and not enough on the other. You may, for example, see that you spend too much on your wants and not enough on saving. Once you know that, you can make adjustments to improve your overall financial health.
What Happens If An Emergency Threatens Your Budget?
Emergencies are still possible with any kind of budgeting approach, even if you feel you have gotten the 50/30/20 budget perfected. This is why it is a good idea to have quick help available that can get you money quickly for any emergency expenses you suddenly get. If you find yourself needing fast money, consider getting a secured or unsecured short-term loan to keep you going. We here at Cash Cow offer you either payday loan or a title loan to help you out.
Payday Loans
Getting a payday loan means you get an unsecured loan to borrow money while waiting for your next paycheck to come in. You could borrow between $100 and $300 at Cash Cow with us by providing your driver’s license, latest pay stub, and a blank check from your active checking account. Another state-issued ID will do if you don’t have your driver’s license.
Title Loans
You can also consider getting a title loan if you own a car and are finished paying it off. This title loan requires a lien-free car title to use as collateral and can get you between $300 and $1,400, depending on how much your car is worth. You’ll be able to keep your car if you get this loan, but you must first bring it in for a quick physical inspection to determine its value.
Get Quick Financial Help Now!
The next time you need a budgeting approach, try out the 50/30/20 budget to see if it works well for you. Give it a few months and learn from the experience, and remember that you can turn to Cash Cow if you have emergency expenses and need quick cash. Just fill out the simple online request form on our website and a representative will contact you soon after to help you get through the process for either of our two loans.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.