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The 50-30-20 budgeting rule, popularised by US senator and author Elizabeth Warren, simplifies personal finance by dividing income into three categories.
This budgeting method allocates 50% of post-tax income to needs, 30% to wants and 20% to savings and debt payments.
50% of post-tax income should be allocated to essentials, including housing, groceries, insurance, utilities and transportation.
Discretionary expenses, including entertainment, dining, travel and hobbies, should make up 30% of income.
20% of income should be allocated toward savings, investments, building an emergency fund and reducing debts.
In addition to simplifying money management, the 50-30-20 rule defines clear limits for essentials, lifestyle choices and savings, helping you build financial discipline.
Understanding where your money goes each month gives you control. Tracking expenses helps find habits, avoid budget leaks and stay aligned with your 50-30-20 plan.
Every budget must evolve with life. Changes in income, expenses or goals will shift spending patterns. Regularly review your 50-30-20 allocations to keep them relevant and effective.
The 50-30-20 rule provides a simple structure to manage money confidently. It supports financial stability and offers peace of mind through disciplined spending and saving.
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