Tuesday, December 11, 2018
MERS CentsAbility Blog

 

How to Budget for Success

How to Budget for Success

1:36 Min Read

Budgeting for retirement can appear to be a daunting and complex task at first glance. However, the simple 50/20/30 budgeting rule can ease the burden and bring you peace of mind. The rule provides a balanced budget that can be adjusted to fit your personal financial goals.

The 50/20/30 rule divides your after-tax, take-home pay into three separate buckets:

  1. 50% of your income goes to necessities/essentials (housing, utilities, minimum debt payments)
  2. 20% of your income goes to savings/financial priorities (long-term saving, extra debt payments)
  3. 30% of your income goes to lifestyle spending (entertainment, hobbies, and vacations)

Dividing income into three separate buckets allows for simple and effective budget management. The necessities bucket contains fixed costs that you make on a monthly basis. These required payments carry consequences if they're not made and must be adequately budgeted for. The savings bucket consists of long-term saving goals. Consistent savings will help you address unexpected emergency spending and prepare for retirement. The lifestyle bucket budgets for non-essential spending that contributes to leisure and entertainment. Think of lifestyle spending as the rest of your income after contributing to the other two buckets. This ensures that your fixed costs and financial priorities are addressed first.

Practicing the Rule

This approach provides a holistic understanding of your finances and categorizes spending. Trackable spending allows you to identify opportunities to reduce expenses and increase savings. Certain bills and expenditures such as cable, satellite radio and eating out can be reduced or eliminated. The earlier and more you budget for saving, the more you'll benefit in the long run.

Peace of Mind

Making the 50/20/30 rule a habit will reduce the burden and complexity of the budgeting process. Dividing your income into three distinct buckets will provide an understanding of what and where you should spend your income on. With trackable spending, costs are controlled, allowing for adequate saving. Practicing this habit of budgeting will allow you to prepare for a predictable and sustainable financial future.


Latest RSS Link RSS

Categories: All, Budgeting

MERS Social Media MERS Facebook MERS TwitterMERS LinkedInMERS Youtube

Disclaimer
The information contained in this Web site is being made available as a public service. The information is not intended to constitute legal or investment advice, or to replace official versions of that information. Benefit Estimates or Service Credit Purchase estimates requested through this Web site are not official descriptions of any benefits, and do not represent a promise by MERS to provide any benefit(s) to any person(s). No one can detrimentally rely upon the information provided in, or requested through this Web site. MERS reserves the right to correct any errors, and presents this information without warranties, express or implied, regarding the information?s accuracy, timeliness or completeness. If you believe the information is inaccurate, out-of-date, or incomplete, or if you have problems accessing or reading the information, please call MERS at 800.767.MERS (6377).