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"Understanding the 50/30/20 Budget Rule: Budget 50% for necessities


Your essentials typically encompass your fundamental living costs and should make up 50%
50/30/20 budget


Your essentials typically encompass your fundamental living costs and should make up 50% of your after-tax income. These are the non-negotiable items you require for daily living, distinct from your desires, which are things you'd enjoy but aren't essential for survival.


Examples of necessities include:

  • Utilities

  • Groceries

  • Health care

  • Student loan payments

  • Rent or mortgage

  • Transportation expenses

  • Credit card and other debt repayments

  • Childcare

  • Insurance

The amount allocated to necessities may evolve over time. For instance, once you've paid off your student loan, you'll have extra funds in your essentials budget. You could redirect this surplus towards other expenses, such as increasing monthly payments on your vehicle loan or mortgage, thereby accelerating your debt repayment.



Courtesy of Citizens Bank

 

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