50/30/20 Smart Spending

A good rule for Smart Spending is 50/30/20. Using this guideline, 50% of your income should go to basic needs such as groceries, housing, utilities, insurance, childcare, transportation, and monthly loan payments. Another 30% of your income for non-essential spending, and the remaining 20% for savings, charitable donations, and debt reduction.

It’s important to save money for future unforeseen expenses. Some expenses are totally unpredictable, like sudden unemployment, health emergencies and accidents. Other expenses are somewhat predictable—you do not know exactly when the emergency will happen, but you know it’s only a matter of time before they do—like car and home repair, pet care, or replacing a major appliance. While you should budget separately for the predictable emergency expenses, you should set aside savings for the unpredictable expenses. Most financial experts suggest at least three months’ worth of expenses be put aside in your emergency fund. While you won’t be able to build this account overnight, you can set short-term goals to save over a period of time.

Even if you do not have the time or energy to get your budget set up right now, you should try to prioritize making an emergency fund. The simplest way to set up an emergency fund is to “set it and forget it” by splitting your paycheck deposit. Set up your paycheck direct deposit so that each time you are paid, $25.00 goes directly into your savings account. By taking this easy step, at the end of the year you will have $650.00 in your savings for a rainy day. Split your check and start saving today!