29/06/2023
We all love the beautiful sound of credit alerts at the end of the month. However, how much of this do we invest?
Month after month, we receive these notifications from our banks that indicate our salaries have been paid or we have earned some income. As soon as we receive this alert, our mind starts to wonder about all the mounting bills we need to pay, all the things we’d love to buy: new generator, new phones, that dream vacation to the Maldives. The list is endless.
For the financially conscious, an additional question often added to the list is how much should I save and invest this month?
The 50:20:30 finance rule categorizes your budget into three buckets.
The first 50% is the “necessity bucket”. This suggests that 50% of your monthly income should be budgeted for necessities such as food, shelter, clothing, and transportation; basically, things you can’t do without.
The second 20% is the “financial priority bucket”. This suggests that 20% of your monthly take-home pay should be dedicated to long-term saving and paying debts.
The third 30% is the “lifestyle choices bucket”. This suggests you spend not more than 30% of your income on consuming items like entertainment, vacation, gym, cell phone recharge, and cable TV.
The more income you save and invest, the more the returns you get on your savings and/or investment, the quicker you can achieve financial freedom.
- Culled from Cowrywise
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