In order to get started, understand your income first. How much do you earn in a month? Understanding how much you make each month first sets the guidelines for the rule. The 50-30-20 rule says that you put 50% of your money towards needs, 30% toward wants, and 20% toward savings. Here’s a brief breakdown:
In this rule, needs will mostly take half of your budget. These are the expenses that must be met after your salary/income is credited in your accounts. Some of these expenses might include:
These are the things that you cannot live without. Your minimum credit card payments or a loan payment might also fall in this category.
Wants usually comprises of things that you spend by choice. The items might include non-essential things such as:
The 20% of your budget should go towards securing a good future for yourself or your family. If you have high interest debt, paying towards it might also fall in this category. Emergency funds, retirement funds, etc. are some examples of this category. You can use SBS 50/30/20 calculator to divide your net income within seconds.
In Nepal, joint families are a norm. You might also require to take care of your loved ones, might be your brother/sister as well as your parents/ grandparents. You must adjust your budget to make room for such expenses or you might also receive financial support from your parents as well.
Let's say you are a young professional living in Kathmandu and you earn NPR 60,000 per month after deducting govt taxes: Here’s a brief division on how you can manage the rule, additionally you can also use the SBS 50/30/20 calculator and set your budget accordingly in just a few seconds :
Needs (50%): NPR 30,000 (house rent, food, transportation, etc.)
Wants (30%): NPR 18,000 (going to see movies, eating out, hobbies)
Savings/Debt (20%): NPR 12,000 (emergency fund, retirement, etc)
Important Note: The 50/30/20 rule is a helpful guideline, but not a rigid thing for you to follow aggressively. Always check your priorities first, then allocate as per your convenience. This rule does help you gain financial freedom in the long run.
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