Budgeting – monitoring and adjusting spending habits over time – is a tried and true method for improving financial health. But for a lot of people (myself included, urgh), budgeting is a chore. It's tedious and stressful – and that's a recipe for procrastination.
The 50/30/20 approach to budgeting uses broad strokes to simplify the process by designating specific portions of income for specific purposes, without wading through months of bank statements and spreadsheets.
Many people wait until the end of the month to decide what to save, or until tax prep time to decide what to invest for retirement. They wait to see what is left over before deciding to set aside for the future. It's like waiting to see how much ice cream is left in the bowl before deciding if eating better is a good idea.
The 50/30/20 technique reverses the process by designating money for saving & investing as it comes in, rather than after paying for bills, housing expenses, and recreation. It's an easy to understand and implement solution for making good decisions.
Properly executed, the 50/30/20 Budget allows for a low-stress balance between quality of life and responsible money management. Pro tip – automate your saving, investing, and essential expenses to remove the guess work!
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Founder, Iseler Financial, LLC