Being smart about managing finances is essential to free us from economic problems, especially debt. By managing income and expenses in detail, we can control what is a priority and non-priority when buying something so that we don't waste it.
One method currently famous for managing finances to be allocated well and with consideration is the 50-30-20 method. So, what is the 50-30-20 method? This method is a unique way to divide each expense according to ordinary needs and desires instead of top priorities.
This method, popularized by United States Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan, has the following expenditure distribution formation.
In general, knowing the proportion of income and expenses can help us stay on budget every month.
However, this kind of budgeting method still depends on the situation and conditions of each individual. The 50, 30, and 20 percentages sometimes suit everyone's problem. For example, an allocation of 50% of our needs could be too little even if we are still single when we are just starting our career but are forced to live in a strategic area of the capital city. The cost of renting a place to live and daily necessities is relatively high. On the other hand, the 30% allocation for wants can also be considered too large when we are well established, have a family, and have a high-income level, so it tends to encourage us to be wasteful in our monthly expenses.
In the end, the 50/30/20 rule can be an essential reference when budgeting, but we still have to make budget adjustments based on each situation, needs, and lifestyle. The rules that suit you are more like 60/20/20, 50/20/30, or even with a unique number of categories like 50/30/10/10 or 80/20. It's all in our hands and how well we know our situation.
Source: Bisnis.com & Manulife.co.id
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