Let’s Talk Money
Not any heavy business talk. Just some light conversing on where to spend the money that you currently have. Whether it’s your monthly income setting the limits of your spending or an allocated amount you set to spend each month, it is a great habit to become mindful of your money. Spending and reserving money during your young professional years can become quite useful and even a productive skill and that’s why it’s something I’d like to talk about.
There is an idea, popularized by Massachusetts Senator Elizabeth Warren, that attributes a 50/30/20 rule to budgeting. It says that 50% of your monthly income should go towards needs, 20% to savings and the remaining 30% for others, which is basically anything you want. It’s a popular idea because it is a great model to guide you on where to spend and what to save.
50% to Needs
Half of your paycheck should go to needs. For me, that’s rent and utilities, groceries, and insurance. This may include for some, student loans or debts. If you are spending more than 50% then try and downsize in those essential needs areas. I started buying my groceries at the local outside market instead of a regular supermarket in order to get my produce for half the cost. Small changes like switching locations on where to shop can help you get within your budget, and there are many other ways to make it, like downsizing. You know which changes work best for your lifestyle, but do those adjustments and make it to 50%.
30% to Wants
We all have desires and taking them on can make us happy. This includes hobbies, vacations, dining out and entertainment. Your wants are just as important as your needs and that’s why when you follow the 50/30/20 rule you are acknowledging that because you are giving entertainment a monetary place. Here is where you can use funds towards gaining new skills or courses that benefit your career. My 30% goes towards a gym, dining-in with friends and streaming services, like Netflix and spotify. Again, stay within the 30% budget and if you aren't then adjust - that could mean limiting your happy hours, not purchasing a luxury this time or finding someone with a Netflix account you can use.
20% to Savings and Investments
Everyone should have a savings account and if you don’t yet start this month and set aside 20% of your paycheck to set aside for later. There are many different ways to set aside money but put it into something you trust. Add it to a fund in a savings account, make IRA contributions to a mutual fund account, or invest. Getting used to setting aside money is a great skill to have and when needs or wants conditionally extend to larger purchasing decisions, you have built for yourself some space to feel good about supporting your purchase.
You choose your 50/30/20
You decide your needs, wants and your choice on how and where to save your money, so for each individual, although sticking to 50/30/20, budgeting is very personal. That is why you must be honest with yourself throughout the entire process. In the beginning it might be hard to plan ahead but the more you make these habits part of your life the easier it will be to manage your money.
Subscribe to the Razroo Angular Newsletter!
Razroo takes pride in it's Angular newsletter, and we really pour heart and soul into it. Pass along your e-mail to recieve it in the mail. Our commitment, is to keep you up to date with the latest in Angular, so you don't have to.