Do you know the 50-15-35 rule?
The great question of many people who want to control their finances better is how to make the expenses fit within the monthly income. That is not an easy task since the needs and temptations of consumption are everywhere.
To solve this problem, the tip is to set goals for the monthly budget. So you have more clarity of how much you can spend on each expense to achieve your first two financial goals:
1. Stop being always out of money;
2. Start saving money.
There are several ways to organize these goals. One is to apply the 50-15-35 rule. Have you heard of it?
The good news is that the 50-15-35 rule works very simply. From now on, when allocating your income to your monthly expenses, you will now consider three major groups:
50% for essential expenses:
The essential expenses include all the expenses necessary for you to stay in the day-to-day: housing, education, health, transport, and food are examples. Soon, this category includes expenditures such as rent, electricity bill, gas, telephone, school, bus ticket, gasoline, English class, medical agreement, medicine, therapy, fair and supermarket.
15% for financial priorities:
There are two possibilities for your financial priorities, depending on how your financial situation is:
1. If you are in debt: your financial priority will be to pay off your debts. Remember that depending on the severity of your financial situation, you may need to commit more than 15% of your income to resolve it. In this case, you will have to compensate by cutting expenses in the other two groups: lifestyle (we will talk about it next) and essential expenses (although there is a lower margin of cut, it is always possible to save on the cellular and supermarket account). Consider taking out a loan at a low-interest institution such as Just if you’re stuck with expensive credits like an overdraft.
2. If you are not in debt: your financial priority will be to save some of your income to achieve your medium- and long-term goals. By saving 15 percent of your income each month, your first financial goal should be to build an emergency reserve of three to six salaries so you can protect yourself from life’s uncertainties and not have to rely on overdrafts each time you come across An unexpected expense.
35% to maintain your lifestyle:
With the necessary expenses in order and the financial priorities guaranteed, you are free to use the money with what gives you pleasure. The expenses related to your lifestyle are all those that are not essential (that is, they can be cut off in a moment of tightening), but they are important for you to have fun and enjoy life: bars and restaurants, ballad, Gym, Beauty salon, travel, cable tv, magazine signing and shopping at the mall are all examples.
The big secret is to understand that lifestyle expenses should come AFTER you’ve already taken care of your essential expenses and your financial priorities. In this situation, you are free to spend no fault at all.