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master your budget with 50-30-20 Rule Calculator
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Imagine someone giving you a blank check and asking you to spend as much as you like. You don’t have to pay back a single penny. The world would have been a beautiful place for you. You don’t need to work. But such things happen only in fairy tales.
In reality, We all have a limited amount of money, some have more, and some have less, but money is limited. Out of this limited amount of money, we have to fulfill basic needs like food, house, clothes, utilities like water, electricity, internet, municipal taxes, etc. On top of it, we all want to live a luxurious life based on our affordability like owning a car, going on a vacation, offering parties to our friends, etc. Also, we all need a decent post-retirement life. For that, we need to save money now, which will take care of our daily requirements during the post-retirement period.
But should you have control over how much to spend on any of these needs, wants, and savings? The answer is a resoundingly Yes.
The famous investor, Warren Buffett, who made money management fairly simple, says, “Do not save what is left after spending, but spend what is left after saving.”
What does that mean for a person like you and me?
Simply this means, we should focus first on building the retirement kitty, then fulfilling the basic needs, and then go for luxury with the leftovers. I use a connotation in my life – “I like SNOW“. I is for Income, S for Savings, N for Needs, and W for Wants, in that order. This phrase is easier to remember.
The challenge is, can anyone afford luxury after fulfilling both savings and needs?
The short answer is – Yes. There is a thumb rule of 50-30-20 to solve this maze. In this blog post, we will break down this rule and introduce you to an easy-to-use 50-30-20 Rule Calculator as part of our Next Gen Personal Finance Solution suite so that you can master your budget.
50-30-20 Rule Calculator
| Category | Type | Input |
|---|---|---|
| Income | Gross Monthly Post Tax Income: | |
| Savings (20%) | Savings (Stocks, Bonds, MFs etc.) | |
| Retirement Savings (401K, IRAs, Provident Fund etc.) | ||
| Debt Repayments (Pre-payments for Education Loans, Car loans etc ) | ||
| Total Savings/Debt Repayments | ||
| Needs (50%) | Housing (Mortgages, Rent, Property Taxes, Insurance (Life, Home), House repairs), EMIs on Education, Personal, Car loans etc. | |
| Education and Health care | ||
| Food / Groceries | ||
| Utilities (Electricity bill, water bill, internet charges, gas bills etc. and Transportation) | ||
| Total Needs | ||
| Wants (30%) | Personal and Family Care (shopping, pet care etc.) | |
| Travel and Leisure | ||
| Recreation and Entertainment Subscriptions (Amazon, Netflix, club memberships, functions like birthday, Christmas) | ||
| Others |
| Category | Target | Actual | More/Less |
|---|---|---|---|
| Savings (20%) | |||
| Needs (50%) | |||
| Wants (30%) |
Summary
Total Income: $
Total Savings: $
Total Needs: $
Total Wants: $
Summary Message:
50-30-20 rule calculator
How to Use the 50-30-20 Rule Calculator
You have to input the following monthly details into the calculator: (Keep a dairy of all incomes/ expenses during the month so that you have the numbers to input)
- Income : Input your gross monthly post-tax income into the 50-30-20 rule calculator.
- Savings (20%): Reserve a minimum of 20% of your income for savings or paying off your debts. You must put these savings into income-generating long-term assets.
Enter details about your savings like stocks, bonds, and mutual funds, retirement contributions like 401K and IRAs, and debt repayments like paying off your credit card dues. The calculator computes your total savings and debt repayments. The calculator also shows your progress towards the goal and suggests adjustments if needed.
- Needs (50%): Input your expenses to fulfill basic requirements like housing, EMIs (Equated Monthly Installments), utilities, healthcare, education, and groceries. The calculator calculates your pending needs and helps you set a target based on your income.
- Wants (30%): Allocate the remaining 30% of income for non-essential and enjoyable expenses, such as dining out, entertainment, and hobbies. Enter amounts for personal care like luxury, travel, subscriptions, and other non-essential expenses. The calculator shows your total wants spending.
Results: View a detailed summary of your income, savings, needs, and wants. The 50-30-20 rule calculator will summarize your spending patterns and give the details at the end. It will give a summary message if your spending in a certain category is higher or less. Check the results to see, if you are on track with the 50-30-20 rule and get insights into the areas you need to act upon.
Example : Assume the post tax earnings is $ 1000.00 per month.
Investment in stocks/bonds/gold – $150 Investments in 401K, IRAs – $100
Housing mortgage – $200, School Fees – $ 100,
Groceries – $ 300, Utilities – $ 100
Recreation activities – $ 50
Summary will be displayed as below :
Total Income – $ 1000
Total savings = $250
Total needs – $ 700
Total wants – $ 50
Summary message : You are doing good at saving for your financial freedom.
Other EMIs (Education Loan, Personal Loan, Car Loan) – $ 100
Next comes fulfilling basic needs for your life – allocate a minimum of $ 500.00 here.
Then comes fulfilling your aspirations to live
The summary from the 50-30-20 rule calculator will be displayed below –
Bookmark: Bookmark our 50-30-20 rule calculator page and visit again on a monthly/ quarterly basis to check whether you are on track with your targeted budgeting or you are frequently going out of the way. If you are off the target, see which areas you can reduce and where you can increase the allocation of your money.
Why to Use the 50-30-20 Rule Calculator?
- Simplicity: The calculator simplifies financial planning into three easy-to-understand categories.
- Guidance: Receive guidance on how much to allocate to each category based on your income.
- Adjustments: Get instant feedback on whether you need to adjust your spending to align with the rule.
- Financial Awareness: Gain a better understanding of where you are spending and make informed decisions.
Conclusion: The 50-30-20 Rule Calculator is a user-friendly tool that puts financial control in your hands. By following this rule and regularly using the calculator, you can master your budget, and build a financial plan to enjoy life and secure your future.
So, Start your next gen personal finance journey today! Live your “I like SNOW” life!!
FAQs on 50-30-20 rule calculator
How do you calculate the 50-30-20 rule for budgeting?
The 50-30-20 rule is one of the most popular varieties of percentage-based budgets. The plan is to allocate first 20% of your money to Savings, next 50% to necessities, and remaining 30% percent to wants.
What is a 50-30-20 budget example?
A simplistic example of calculating your target budget as per 50-30-20 rule is:
If you make $1000 a month after taxes, then 20% ($200)should go towards your savings, the next 50% ($500) would go toward needs, and the remaining 30% ($300) goes toward your wants or discretionary spending.
However, in real life, you need to classify your expenses under the right category and then see whether you are on the right track or not. You would need a 50-30-20 rule calculator for that.
What are some of the most popular 50-30-20 rule calculators online?
Try out 50-30-20 rule calculators from Lifespectrum360.com, Citizens Bank, and the United Nations Federal Credit Union (UNFCU).
If you have any suggestions or feedback about our 50-30-20 rule calculator, please write to us at contact@lifespectrum360.com.
Birendra Sahu, FRM, CISI
Birendra Kumar Sahu is an accomplished professional with a diverse background in the fields of finance, wealth management, risk management, and strategy. With a career spanning over two decades, Birendra has demonstrated exceptional skills in analyzing complex financial data, devising effective risk mitigation strategies, and driving organizational growth.
Birendra holds a Bachelor's degree in Engineering from a prestigious institution and has continuously augmented his expertise through various certifications and professional development programs. He has a keen interest in exploring innovative approaches to financial analysis and risk assessment, which has positioned him as a thought leader in his field.
Throughout his career, Birendra has held key roles in prominent organizations, where he has been instrumental in steering financial operations, optimizing processes, and implementing robust risk management frameworks. His strong analytical acumen and strategic mindset have enabled him to navigate through dynamic market conditions and deliver sustainable results.
Apart from his professional endeavors, Birendra is passionate about mentoring aspiring finance professionals and contributing to the community through volunteering initiatives. He believes in the importance of continuous learning and strives to stay abreast of emerging trends and technologies shaping the financial landscape.
Birendra's dedication to excellence, coupled with his commitment to driving positive change, has earned him recognition and respect within the industry. He continues to inspire others through his achievements and remains focused on making meaningful contributions to the world of finance and beyond.