The 50/30/20 budgeting rule allows you to build a budget with room for a financial cushion. Here are four tips to help you maximize your savings while covering basic wants and needs.
1. Look at your take-home pay
Note how much money gets dropped into your checking account after taxes are accounted for – this is the exact amount you’re working with for the 50/30/20 budget rule.
2. Keep track of where your money goes
Next, do some simple math to figure out how much money goes into each bucket. If your take-home pay every two weeks is $2,000, then the rule would say to set $1,000 aside for your needs, $600 for your wants, and $400 for your savings.
If you find that they don’t quite fall in line, that’s okay! This is the perfect time to roll up your sleeves and tweak your finances.
3. Cut back on your spending
Cutting the cost of your needs can be tricky, especially since most of these costs are unavoidable. You can cut back on only so much, but it’s not impossible.
Start by reviewing each expense and see what you can do to reduce monthly costs. Can you contact your cell phone provider and see if it has any special promos you can take advantage of? Are there any shopping apps that give you coupons for discounted groceries?
Cut things you don’t enjoy spending on but might do so out of habit or because you forgot you were paying for it. Maybe you signed up for HBO Max months ago, but no longer use it and are still paying for it every month. That’s an easy drop, just by canceling the subscription.
You can also try the “swap it, don’t stop it” tactic. Instead of dropping an expense entirely, look for lower-cost alternatives. If you enjoy reading, instead of buying new books every month, maybe borrow them from your local library or swap them with a friend.
Take the guesswork out of your budget — use our budget calculator.
4. Make it easy to put money into savings
Give your savings bucket some love by doing the following:
- Set up automatic transfers: If you’re a Chime member, make the most of Automatic Savings features. If you turn them on, Round Ups round each transaction you make on your debit card to the nearest dollar. Then, it saves the difference and moves that money from your Checking Account to your savings account.
- Save a portion of your paycheck: When payday rolls around and money drops into your bank account, you can turn on Save When I Get Paid to save a percentage of each paycheck into your savings. So, let’s say you get paid $500 each week. If you opt for 10% of each check to go automatically into your savings, that’s $50 that gets set aside. It’s an easy, painless way to save.