PRIORITY NO. 7: SAVE FOR YOURSELF
Great job! If you’ve taken all the steps above, you’re in a great position. You’ve built smart money habits and now have more freedom with your money. To earn more on your savings, think about using a high-yield savings account. These often pay more than regular savings accounts. You can divide your savings into different buckets — one for emergencies, one for car repairs and one for fun. Some banks will automatically move your monthly interest earnings to your bucket of choice, helping you reach your goals faster. The more you save, the more your money grows. It’s a win-win.
TRY A SIMPLE BUDGETING PLAN: 50/30/20
One popular budget plan is the 50/30/20 budget. If you stick to this plan, you can handle your bills, save for the future, prepare for emergencies and enjoy life, too.
ALLOW UP TO 50% OF YOUR INCOME FOR NEEDS
Your necessities — about 50% of your after-tax income — should include:
• Minimum loan and credit card payments. Anything beyond the minimum goes into the savings and debt repayment category. • Child care or other expenses you need so you can work.
• Groceries
• Housing
• Basic utilities
• Transportation
• Insurance
If your basic needs go over 50%, you can use some of your “wants” money for now. That’s OK. But if those needs are going over 50% month after month, consider switching to another budgeting model. Switching your budget isn’t a sign of failure. Budgets should work for your life. If your necessities fall under the 50% cap, review the expenses that stay the same every month, often called fixed expenses. You may find a better cell phone plan, an opportunity to refinance your mortgage or a less expensive car insurance option. Those money moves create breathing room in your budget.
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