How to Budget with the 50/30/20 Rule in 2023
It’s Day 5 of Money Saving March, and today we are talking about budgeting again. More specifically, we are discussing using the 50/30/20 budget rule to save money in 2023. The 50/30/20 rule is an excellent way for self-employed or independent contractors to manage their money better, especially when it comes to saving. Let’s dive into this budgeting rule and how you can use it to move forward in your financial independence journey.
What is the 50/30/20 Rule?
The 50/30/20 budget rule is a simple yet effective tool for managing your finances. It calls for you to divide up your after-tax income into three buckets. The first bucket should be used for needs (50%), the second should be used for wants (30%), and the third should be used for savings (20%). This means that out of every dollar earned, fifty cents goes towards paying bills and buying necessities such as groceries, thirty cents goes towards discretionary spending like entertainment or dining out, and twenty cents is put into savings.
Why Use the 50/30/20 Rule?
There are several reasons why this budgeting rule can help you save money in 2023. First of all, it helps give structure and order to your spending habits. Knowing exactly how much money you need to spend on bills each month and how much you can spend on non-essentials like entertainment makes it easier to stay within those boundaries. Also, forcing yourself to save a certain percentage of your income will encourage you to save and grow your financial cushion so that unexpected expenses don’t hurt your bottom line.
How Can I Use The 50/30/20 Rule in 2023?
Using this budgeting rule in 2023 is easy! All you have to do is figure out what percentage of your monthly income you need for needs (50%), wants (30%), and savings (20%). Then put aside that amount each month so that at least half of your paycheck or earned income goes towards paying bills and other necessities while the other half goes towards discretionary items and saving for the future.
Also, as we discussed on Day 4, you might want to set up automatic payments so that they come right out of your paycheck each month, and you don’t have to move money from one account to another by hand. This will ensure that everything gets paid on time while also taking away extra work from remembering when something else needs payment or transferring money manually each time a bill arrives!
And to help you fight the urge or temptation to spend your savings, consider opening a new savings account with another bank. DCU is among my favorite credit unions and allows automated payments. So, for example, you could have your money deposited into your checking account, and then a certain amount of money transferred into your savings account automatically.
50/30/20 Rule Calculator
If you need a little help figuring out exactly how much money you will need to allocate toward each different category, you should consider checking out the 50/30/20 rule calculator that we stumbled across on Citizens Banks site. It’s straightforward – all you need to do is input your monthly after-tax income, and it will spit out the appropriate amount for each of the three categories.
Start Your 50/30/20 Rule Strategy!
As self-employed people or independent contractors, getting into the habit of budgeting can help us reach our financial goals faster than ever. The 50/30/20 budgeting rule offers an easy way to keep track of our spending and automate payments where possible—all while encouraging us to prioritize saving over spending on non-essentials such as entertainment or shopping sprees, which we’ll get more into later this month! Now that Money-Saving March is well underway, it’s the perfect time to start thinking about using this helpful strategy in our everyday finances to help us reach our financial goals faster.
If you are new here, consider starting with Day 1 of our challenge to help get the ball rolling with your spending plan and budgeting. And then, you can think about applying the 50/30/20 strategy.