Great work learning about needs vs wants! Now let's put that knowledge to work with a simple budgeting framework.
The 50/30/20 rule is one of the most popular budgeting systems because it's straightforward and flexible for most people.
Engagement Message
Have you ever heard of the 50/30/20 rule before?
Here's how the 50/30/20 rule works: you divide your net income (remember, that's your take-home pay) into three categories.
50% goes to needs, 30% goes to wants, and 20% goes to savings and debt payments.
Engagement Message
Which category do you think gets the biggest chunk of your income?
The 50% for needs covers those essential expenses we discussed previously. This includes rent, groceries, utilities, minimum debt payments, and basic transportation.
If your needs cost more than 50% of your income, you might need to find ways to reduce them.
Engagement Message
Can you recall three expenses that would count as needs?
The 30% for wants covers everything else you enjoy but don't absolutely need. Dining out, entertainment, hobbies, premium subscriptions, and non-essential shopping all go here.
This gives you permission to enjoy life while staying within reasonable limits!
Engagement Message
What's one "want" expense you'd definitely include in your 30%?
The 20% for savings and debt is crucial for your financial future. This covers emergency funds, retirement contributions, extra debt payments, and other savings goals.
Many people struggle to save, but this rule makes it automatic by budgeting for it first.
Engagement Message
What's one reason people might find it hard to save money?
