One of the most popular budget tools has saved people’s financial futures on countless occasions. It was popularized by Senator Elizabeth Warren, a senator of Massachusetts. She is also an author and this budget method was widespread in one of her best-selling books.
The Budget Rule is 50/20/30. These numbers are a way to divide a monthly income into 3 main parts. The rule divides the after-tax income by spending 50% of the income on needs, 20% on savings, and 30% on wants. With this budget, the income is broken up into order of importance.
The category of needs refers to the bills that must be paid no matter what. If you do not pay these bills, you will lose something necessary for survival. These payments would include rent or mortgage payments, car payments, groceries, insurance, healthcare, minimum debt payments, and utilities. This category does not include extra items, like cable or eating out.
Put 20% of monthly income toward savings. This category includes adding money to an emergency fund in a bank savings account, making IRA contributions to a mutual fund, investing in stocks, or investing in life insurance. Savings can also include debt repayment. Minimum debt payments are part of the needs category. This means any extra payments reduce the principle and future interest owed, so they count as savings.
This category refers to all the money spent on items that are not absolutely necessary. This category includes dining out, movies, shopping, sporting events, vacations, electronic gadgets, etc. In addition to these items, the wants category also includes upgrade decisions. Items like a higher-priced steak instead of a cheaper hamburger or watching T.V. using free antenna or paying for cable. Simply speaking, wants are all the small extras that make life a bit more enjoyable and entertaining.
There is no reason to wait and secure your families future, especially if it is in the budget. So why wait a moment longer to secure your family’s future with life insurance? Act now! Reach out to one of our life and financial experts today! Choosing the best life insurance plan isn’t always easy. There are many factors to consider and our experts can help you make the right choices.
Did you know life insurance can be used to save for retirement, and to help pay off debt?
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