What’s the 50/30/20 Rule?

The 50/30/20 rule is a simple budgeting guideline to help you manage your finances by dividing your after-tax income into three categories:

1. 50% Needs: Half of your income should go towards necessities, such as rent, utilities, groceries, and transportation.
2. 30% Wants: About 30% can be used for discretionary expenses like dining out, shopping, hobbies, and other non-essential items.
3. 20% Savings and Debt Repayment: The remaining 20% should be allocated to savings, investments, and paying off debt.

This rule provides a straightforward framework for organizing your spending and saving, making it easier to achieve a balanced financial life.

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