We’ve all heard of this little thing called balance. There’s your work/life balance, bodily balance, mental balance, etc. Let balance seep into every aspect of your life, including your finances.

You can do this by implementing the 50/30/20 rule to your budget. Don’t worry we won’t leave you hanging on this... we’ll tell you what to do.

First things first, what is the 50/30/20 budget rule?

Let’s Define It

This easy budget method divides your income into three percentages – 50% for needs, 30% for wants and 20% for savings or paying off debt. The rule is intended for people like you to manage your after-tax income using the same application each month. Consistent implementation of the 50/30/20 budget can work wonders that will ease your financial burdens.

The Breakdown...

50% - Needs

These are the expenses you can’t avoid... as much as you’d like to. The necessities account for 50% of the budget rule.

Here are examples of what these might look like:

• Monthly rent
• Utility bills
• Transportation
• Insurance
• Groceries

30% - Wants

Once you've dedicated the 50% to cover your needs, reward your discipline with 30% of your budget dedicated to your wants. As we've said before – you have to enjoy your money too. This budget rule creates a boundary of balance to manage your finances.

Here are an example of what these might look like:

• Eating out
• Shopping for new clothes
• Self care days (nails, facials, hair appointments, etc.)
• Entertainment subscriptions (Netflix, Hulu, etc.)

20% - Savings

Achieve your savings goals with the remainder percentage of the budget. That or work towards paying back outstanding loans/debt. Whatever you plan on saving for – emergency fund, vacation fund, investment fund or plain saving – start with the attainable amount of 20%.

How to Implement

Now that we've broken down what the rule is – here's how to get started on it today.

Step 1: Calculate your after-tax income

If you're an employee with a steady paycheck, log into your organization's payment platform and take a look at your paystub. On this paystub, you should see the amount that enters your bank account each month. If there are automatic deductions for health insurance or pension funds, add those amounts back into the grand total.

If you're a freelancer, this will be a tad more difficult. Your after-tax income will be what you make each month minus business expenses and amounts set aside for taxes.

Step 2: Categorize your spending

Here comes the fun part – the truth about how you spend your money will be revealed in this step. Grab a copy of last month's bank statement. Do you have it?

Now, split all your expenses into wants, needs, and savings. The truth hurts a little, doesn't it? Don't you worry, use this as a stepping stone to get on track. We're in this together!

Step 3: Adjust spending habits to fit 50/30/20 rule

It is time to implement that 50/30/20 rule using that handy dandy bank statement that we had you look through. Start with assessing the amount you spend on your wants each month – which of these wants can you cut back on to stay within your 30%?

The more you reduce spending on your wants, the easier it will be to hit your target goal of 20% towards savings.

A word of encouragement...

At first glance, implementing a new budget method can seem overwhelming, but we guarantee as the months go on it will become second nature. Start here and give yourself grace for the months you get in less than perfect.