SAVE TO BE SAFE: Ideal Budget Rule For You! 

Having a budget helps everyone in so many ways.  Rather than not having any plans at all, this will help you to sort out things that you need to prioritized. We are pretty familiar with the 50:20:30 budget rule. It’s a common budgeting technique wherein it concerns with allocating your funds based on your needs, wants and savings. This is the most used methods for someone who are bread winners in their family.

To look back in the past, this budget rule was established by Elizabeth Warren, a senator from Massachusetts. This is for her to introduce a budgeting method to her daughter Amelia Warren Tyagi whom they both later on released a published book in 2005 titled “All Your Worth: The Ultimate Lifetime Money Plan”.

Due to that, this budget rule became well known that until now it continues to create impacts in everyone’s lives. To give you a thorough explanation of this budget rule, here is an illustration of what it prioritized.

As you can see, it mostly prioritized first the basic needs and the last is savings. Like what I mentioned above, this is mostly common for people who carries most of the responsibility in their home. For those who have more freedom in their finances, they can alter this budget rule based on what they prioritize.

Now the question is,

Let’s breakdown everything and see what’s the suitable rule for anyone who have different situations and priorities in their lives.

Age’s 20-30 is the very ideal way for anyone to save their money into the fullest. This is because of the less responsibilities that they have. The younger you start to save, the earlier you can have your financial freedom. As you start to save in this period, you must consider having an insurance and invest in a passive source of income.

1.For those in their mid-20’s with less responsibility.

The budget rule ideal for young people with less responsibility is the opposite of 50:30:20 rule. This is to emphasize the priority to save and put in the last their wants. Others may say that, young people should enjoy their life to the fullest and trust me this rule will not oppose it. Why? Because it still gives anyone the freedom to spend but in a limited manner.

If you’re still thinking why this rule is the ideal for them, this is because of the reason that the earlier ones start to prioritized savings, the earlier they’ll know the importance of it. This will give them more freedom as they grow older since they started to settle things that they must have in their early years.

From the illustrations above, each percentage placements shows the specific priorities that one’s must consider. This will give them a better option on what they should do first if there are still skeptical on what they’ll do next.

2. For those in their mid-20’s whom are bread winners in their family.

For those who are bread winners in their family, it is very important for them to manage their finances well. They should not let it all go in just one outlet and make sure that they still have something to save. This budget rule is very ideal for them since savings equates their needs and allowing them to spend also for their wants.

As you can see the percentage allotted to their wants is decreased by half. This is due to the responsibility that they have which prohibits them to spend more than the amount they need to save and for their needs. This rule will allow them to be more responsible in the allocations of their funds while taking care of their savings.

This period is very crucial for those who failed to save more of their income in their 20’s. This is due to the increase of responsibilities which will be there and their budget will be divided more into their needs. If you have more means to save, it is very ideal to invest in multiple sources of income which are small business, rental, stock market etc. that will help you to increase your cash flows.

1.For those in For those in their mid-30’s who are independent and plan to start his/her own family.

If you are in your mid-30’s and planning to have your family, this budget rule will allow you to ready yourself in the responsibility that you’ll be having once you decided to have a family. The increase in needs will be there and you should have a strict budget rule on where it will go to avoid more expenses to incur.

If you don’t have any idea on the things that you need to consider, the illustration above will show you the specific things that you need to think of. This concerns things you need to have in starting a family, the type of savings ideal for your responsibilities and many more.

2. For those in their mid-30’s who are bread winners and have his/her own family.

The more you have responsibilities, the more you need to manage your finances well. You need to be cautious on what you spend and ensure that you still can keep a part of your income in savings. This budget rule can help you to attain your financial goals while considering your needs and wants. All you have to do is to avoid things that can make you spend more and ruin this budget.

Everyone for sure will experience this as we all grow older. The responsibilities will be present among us and we need to be disciplined enough to take care of everything that we spend.

The following budget rule are ideal for the people who have family responsibility. This rule can be implemented to cover the things you need, savings and your wants. You can increase your savings capacity if you started to invest in passive income in your early age. This will help your finance to have more freedom and stable source of income without relying 100% to your salary.

1.For those in their 40’s who have their own family but still working.

This situation is very common to guys who’s working for their family. They usually carry the responsibility of their home and most of the time, they’re the only source of the family’s income. Since this is pretty common wherever we are right now, this budget rule will help anyone to meets their goals & needs while having something for their own self too.

As you can see, the half of it goes to the needs of the family and 40% of it goes to savings. Why? This is because the need to have a retirement fund is there. Of course, you’ll not work in the rest of your life so you need to have something in the future that will help you.

2. For those in their 40’s whom are bread winners and have his/her own family while still working.

This tight budget rule is for anyone who carries the responsibility of their own family and at the same time their parents. Mostly this budget rule concerns the needs of anyone’s responsibilities while putting something for their savings. This rule is a very tight kind of budget since bigger responsibilities are there. This is very crucial and hopefully no one can be in this situation since it will be very hard to put up funds on their savings due to their needs.

The only way to make this budget rule work is to be disciplined enough to lessen your wants so that your savings won’t be affected. Since most of the time the amount of your needs is constant, saving will be the one mostly affected if you spend more than the intended amount for your wants.