You may have come across the 50/30/20 rule as you plan your finances - but what exactly is it? 

The 50/30/20 rule is a method of budgeting and understanding where your money is going that can help your spending in alignment with your savings goals. 

It divides your after tax income into 3 different buckets: Needs, Wants & Savings. 

Heres how you can apply it to your budget: 

50% for NEEDS 

The way you define a need is something you cant live without. 

Set aside no more than 50% of your income for the absolute necessities. 

What are some things that can be included in this? Lets think about regular living expenses. This will include rent, groceries, transportation, healthcare insurance and utility bills (electricity, water, phone). 

Essentials count as any expense that you almost certainly have to pay regardless of your job or current place of residence. 

30% for WANTS

  

A want is something that you desire, but can live without. It is something you don't necessarily need, but it improves the quality of your life. 

Set aside 30% of your income for your wants. 

This would include unnecessary expenses that enhance your lifestyle such as Netflix subscription, Starbucks coffee or buying those new Nike shoes you've been eyeing on. 

Take a look at your expenditure in your monthly budget and decide which ones you're able to cut down. The free cost you have in this category - the more progress you'll make paying down debt and securing your future. 

20% for SAVINGS 

Set aside the remaining 20% for your savings. Think of this as your get-ahead category. This includes saving plans, retirement accounts, debt payments or rainy day funds. 

Ideally, you should have 6-12 months of your living expenses covered for your emergency funds and should be paying off debts such as credit card and student loans on a monthly basis. 

This category of expenses should only be paid after your essentials are taken care of and before any personal spending. 

Whether you make 30,000 or 150,000 a year - establishing a good habit like this will last you a lifetime. 

Until you actually write it down and understand every single one of your after tax ringgit is going - you might be surprised!

Are you ready to get started on your 50/30/20 budget today?