Whether you’re trying to save up for a new home, or have already purchased a beautiful home in Flower Mound, knowing how to budget is important for nearly every aspect of your life. Managing money isn’t easy for many people, and unexpected emergencies can quickly turn your financial situation upside down. Our Flower Mound real estate professionals will explain the 50-20-30 Rule below, which makes budgeting easier than ever!
You don’t need a complicated spreadsheet to build a budget, and it doesn’t have to take hours of your time every month. It’s really a simple rule that focuses on three categories.
Living expenses such as rent or a mortgage payment, groceries, gas for your vehicle, car payments, electric and other utilities; these essentials and expenses to live should account for no more than 50% of your income.
How much should you try to save or invest to meet your financial goals? According to this rule, 20% of your income should go toward saving and investing in the future. This also includes reducing debt through paying down credit cards, etc.
Flexible spending on things you don’t necessarily have to have, but that you want for your lifestyle, entertainment, or enjoyment. When it comes to traveling, shopping for items you don’t need but just want (handbags, perfume, fishing gear, etc.) going out to eat or to the movies, keep costs to 30% of your income.
Of course, if you can keep costs for essentials and living expenses below 50% or spend less than 30% on those things you want but don’t really need, even better! More can go toward savings and investments.
In order for the 50-20-30 Rule to work, it’s important you keep track of every cent you spend for a month or two and categorize your expenses in one of the three categories so you can get a clear picture of where you need to cut back. Simple!
Saving for a new home may seem impossible for some, or if you’ve purchased a home, paying the mortgage may be difficult. Sometimes it’s the simplest plan that works best, so start keeping a close track on your spending and you’ll find ways to meet your financial goals.