How to spend your salary according to the 50-30-20 Rule ?

source

Do you get a salary ?

Then accept my congratulations because you have a job even in this tough financial scenario.
This means you are an asset for the organization so they have retained you and are paying you a salary.
That being said the question is how should you spend your salary ?

Divide your salary spends into three parts or heads

The way you use your salary today would decide what kind of financial security you would have in the future and would you be able to enjoy the same or better lifestyle in the future.

With this financial goal divide how you use your salary into three heads namely

• Your Needs
• Your Wants
• Your Investments

Your needs

These are the must make expenses like paying the rent, buying food, school fee for kids etc. This is the expense which cannot be cut and has to be made every month.
Designate 50% of your salary towards the head **Your Needs **

• Your Wants
  This is the next most urgent head of expense.
  This could include the new shirt or dress you saw at a store that you want to buy for the office party.
  There are a number of other expenses which are aspiration.
  Thus you designate 30% of your salary towards them.

The third part utilization of your salary goes towards
Your Investments
This head is something you should never ignore.
By way of putting money in this head you can ensure that you have the means to build and achieve your mid and long term financial goals.
Not only that it is the money that you save and invest for the future that would help you maintain your life style when you retire and no longer want to or are able to work.

How to spend the money that you get as an increment or a raise?

Now this is the additional money that you are getting and since your basic needs are being met by the earlier or the base part of your take away salary thus the way you allocate the additional money flow should be a bit different,

Do not apply the 50-30-20 rule to the additional money

Instead allocate 50% towards investments
30 % towards your wants
20% towards your needs

The reason for this is that by allocating the biggest chunk of 50% towards your investments you are securing your future and at the same time making sure that you have enough money in case the future throws up any financial challenges.

The 30% money allocated towards the things you want. This is it would create a feeling that more and more of your wants are being fulfilled and this would keep you motivated to work towards your next raise or increment.

This strategy would help you strike a balance in your saving and expenses and make your financial future more secure.

Disclaimer : This is no financial advice. Do your own research DYOR before making an investment. Please make sure you put some part of youy salary into investments for the future.