What Is the 50/30/20 Rule?

Developing a budget can assist you in making informed decisions and experiencing a sense of tranquility. However, managing a precise budget might be intricate.  The 50-30-20 guideline categorizes expenses into only three distinct groups.

Additionally, it provides suggestions for the appropriate amount of money to allocate for each. By acquiring fundamental knowledge, you can go on the path towards achieving financial prosperity. 

The 50/30/20 rule is a simple budgeting guideline that helps individuals manage their money effectively. 

Understanding the 50-30-20 Rule

It suggests dividing after-tax income into three categories:

1. 50% for Needs: This portion of your budget should cover essential expenses that are necessary for living. These include:

2. Housing (rent or mortgage)

3. Utilities (electricity, water, gas)

4. Groceries

5. Transportation (car payments, public transit)

6. Insurance (health, home, auto)

7. Minimum debt payments

8. Essential medical expenses

9. 30% for Wants: This category is for discretionary spending on non-essential items and activities that enhance your lifestyle. These might include:

10. Dining out and entertainment

11. Hobbies and leisure activities

12. Travel and vacations

13. Shopping for clothes and personal items

14. Subscription services (e.g., streaming services)

15. 20% for Savings and Debt Repayment: The final portion should be allocated towards financial security and future goals, including:

16. Emergency fund contributions

17. Retirement savings with platforms like Ndovu 

18. Investments (stocks, bonds)

19. Extra debt payments (beyond the minimum required)

20. Saving for large future expenses (e.g., down payment on a house, education)

    
    

The 50/30/20 rule provides a straightforward framework for budgeting that can help individuals maintain a balance between living comfortably today and saving for the future. 

Ndovu is a good platform that can help you budget and save. Through the Ndovu Platform, one can set their saving goals and include the target amount, period to save and monthly savings to make to reach the goal. Additionally, Ndovu does offer several investments including bonds, ETF’s and MMF that one can invest in. You can reach us at Ndovu for more information and queries. 

Disclosure:

Ndovu is a regulated Robo-advisory platform operated by Ndovu Wealth Limited (‘NWL’). NWL is a Fund Manager licensed by the Capital Markets Authority (Kenya).

The information provided on this platform and the products and services offered are intended solely for persons in regions and jurisdictions where such distribution and utilization are in accordance with local laws and regulations. Ndovu does not promote its services in regions where it lacks the necessary licenses; It is exclusively available to persons residing in countries where it holds a valid license or has regulated partners. Ndovu does not extend its services to citizens of the United States, Canada, Japan, and other restricted territories.

Disclaimer:

 All ETF products are subject to risk, including country/regional, liquidity, and currency risks. Market prices of securities within the ETF may rise and fall, sometimes rapidly and unpredictably.

While ETFs provide diversification through exposure to a basket of securities, they do not eliminate the risk of loss. Diversification does not ensure a profit or protect against a loss. These are non-cis products and are registered by the SEC.