We all know the importance of saving, but for many, it isn’t always easy. That’s why a simple saving system such as the 50-30-20 rule can make saving money easier for anyone.
Finance experts always suggest the creation of a budget to improve the management of our finances. Technology is a tool that can help us make these budgets. Unfortunately, not all of us are ready to use it. Many Canadians have tried to use an endless number of applications, but as the days go on, forgetting to add those tiny daily expenses like coffees or deserts becomes a regular occurrence, and then the habit falls apart. Does this sound familiar to you?
Sen. Elizabeth Warren of Massachusetts, a bankruptcy expert who was a professor at Harvard, was the one who originally coined the term; 50-30-20 budget in a book she wrote with her daughter, Amelia Warren Tyagi, entitled: All Your Worth: The Ultimate Lifetime Money Plan.
The rule has gained notoriety because it makes it easier to control monthly expenses. We only must follow a basic concept. Saving is subtracted from income, leaving the mathematical operation as follows: income - savings = expenses. This simple formula allows you to avoid overspending and constantly increase your savings without the need to monitor each transaction.
The 50-30-20 rule consists of dividing the monthly income into percentages. 50% is for your most basic needs, 20% for your savings, and leave the remaining 30% to cover your wants and whims. It is essential to keep each of the percentages balanced to meet our goals and enjoy our income.
To pay for basic needs, we must use half of our salary. This section includes expenses such as groceries, internet, hydro, mortgage, or rent. In theory, it seems easy, right? But day-to-day needs can vary from person to person.
Savings are an essential part of our future, and the rule suggests that we must use 20% of our salary for saving for the future. This percentage will be for our retirement or some unforeseen expense. On the other hand, each person is responsible for how much they can save, but remember, life is full of ups and downs, and it is better to be ready for the unexpected.
This percentage will surely be your favorite. These are the expenses to pamper yourself, which can include leisure activities such as going to the movies, going out to dinner, those vacations that you want so much, or services such as Netflix or Spotify.
When you have mastered the 50-30-20 rule, you will have better control over your financial situation. Here is when the option of obtaining life insurance comes in, a financial tool to protect the future of your loved ones the moment you die. A life insurance plan can help your family cover daily living expenses or significant debts.
If you are interested in knowing more about our plan, please fill out our form to get a free no-obligation quote. Our friendly advisors will be happy to assist you throughout the process to find the Life Insurance that meets all your needs.