If you are experiencing difficulties in saving and paying off debt at this point in time, you have probably never heard of the 50-20-30 rule. This vital rule can help the budget to accomplish your financial goals. The simple rule allows people to pay off debt, save money and invest at the same time. This rule splits your take-home income after tax deduction.
What is the 50-20-30 rule?
The fifty percent of your income is for basic needs, the thirty percent of it is for wants while the remaining twenty percent is reserved for savings. Let’s break this down for better understanding:
50%: Food, bills, rent, debts and other expenditures
30%: Entertainment, dining, inter alia
20%: Savings and investment
Working out on clearing debts
If the ratio of the debts is a bit too much, then the rule can be adjusted to 80-10-10. This should be the case until the debt has been completely cleared. This is a time when you should reflect on your spending habits and expenditures. It is time to take a hard look and cut back on a few things.
Work on saving goals
For those who still do not have an emergency savings fund, it is high time to set aside one. After this emergency savings fund eventually has saved up enough, some parts of it can be contributed to the investment fund. But more on that later.
If the amount of debt is a bit larger, then it is prudent to set aside 20% to clear off debts and then move into the investment bracket later on. By doing so, your debts will be cleared faster.
The 20% amount can be deemed as a retirement fund, too. But if it is for that purpose, then it is advisable to start much early in your career than later on. It also depends on how early the individual wishes to retire.
It’s investment time
Before proceeding, it is assumed that you have cleared off your existing debt and moved on to savings and investing. This is where the actual game begins. Now that you are debt-free and do save every month, you should open yourself to investment options. There are multiple avenues to invest in. But how about an investment scheme that does not need your day-to-day involvement? Iban Wallet is the answer.
An investment platform that gives investors a projected interest rate from 2.5% to 6%, it is an ideal avenue for investment. All that you need to do is select an account type and deposit the necessary funds to get a daily projected return on your amount. This is what we were talking about. Since it limits the involvement of the investor, they can focus on more pressing matters at hand and aim to expand their portfolio.
More so, these funds are liquid and you can choose to ask for withdrawal at any time you feel the need to.
Following this guideline, you will be able to set a roadmap for financial freedom you have thought for yourself.