How To Manage Your Money (50/30/20 Rule)

welcome back to whiteboard finance my name is marco and i'm here to help you master

your

money

and build

your

wealth. Today we're going to talk about how to

manage

your

money

using the 50 30 20

rule

, but before we get into the video I just want to show you very quickly a screenshot here of a survey I took about two weeks ago, so we have a lot of new subscribers to this channel. , which is great, and about 834 of you voted in this poll, which is amazing, so basically that poll is I'm just asking you what kind of videos you want to see on this channel and 30 percent of you said you're Related to personal finances, 22 percent said the stock market, 18 percent said cars, 17 percent want to learn more about real estate investing and 13 percent said how to make money online. but the encouraging thing is that the majority of the comments in this survey were people who said they wanted to learn about all of these things, so thank you very much to those who voted and contributed and that's why I want to talk about personal finance in this video.

Today you may be wondering what the 50 30 20

rule

is. As always, let's write this down so we can get a visual representation of what it means. Let's imagine we have a pie here and half of this pie, which is 50 percent. it actually represents your needs so again it's about budgeting and understanding where your money goes and I'm on an ideal personal budget portfolio so 50 are needs let's call them 30 percent will be wants and then the 20 will go towards savings or payments. debt, so now that you have a visual representation, let's break down each of these numbers and give you examples of each so you can evaluate your own personal finances based on these metrics.

Keep in mind that we are working with after-tax dollars, which is called net income, so you may have a gross salary of let's say 50 thousand dollars a year, but after-tax it's just another specific number. We're using that number in after-tax dollars, so in terms of 50 percent needed, what are some things? that can be included in this, so let's think about regular living expenses, so we have groceries, we have housing, whether you have a mortgage or a rent, you have health insurance, God forbid something happens to you, I would consider that health insurance is definitely a necessity, you can have utilities, electricity, things like that, etc., so the way I define a necessity is that it's basically something that would be a huge inconvenience to you or something that you literally would be without. you can't live, so food shelter, things like that, when you budget 50 percent for your needs.

Remember that's what you're looking at, so the next logical area to address will be what actually counts as a want, and I think this is where most Americans run into the difference between wants and needs. Well, then a wish is something. that causes a minor inconvenience in your life, okay, it's not necessarily a need, hey, if I don't eat or if I don't have shelter, I can die, a desire is something where it's like, hey, you know, I'm willing to give . a minor inconvenience like quitting Netflix or not having Hulu or not buying a new grill to cook a steak on, you know those are necessities, okay, so some of the things that would fall into this category would be things like shopping, is that absolutely necessary to buy?

For new clothes right now, are you going to die if you don't buy a new pair of shoes? Maybe my wife will, but I know I can survive. You know, going out to dinner. I think this is very important for Americans. Of people, for whatever reason, their lifestyles are so busy that you know it's easier to get in the car and go grab something to eat rather than prepare the food yourself. Hobbies, so I think everyone should have a hobby that is one of the greatest pleasures. of life, whether it's gardening, you know you fly drones, you're a video editor, whatever you want to do, whatever keeps you happy as a hobby, this definitely falls under a desire because you don't need to live, so again, guys, a wish is something that is not necessarily necessary, but it greatly improves the quality of your life, so let's go to the last 20 and I know a lot of this sounds basic, but until you write this down and understand where it's all going your money, it's like your wants can easily fall into that category of needs where both are overflowing and you are in debt every month, so speaking of debt, let's talk about savings, okay, so savings and paying debts, this is where the last 20 of your income should go and again.

These are all net numbers, so if you have, let's call it, let's say, for example, an emergency fund. Okay, I would consider savings, what I like to do for emergency funds, this is 6 to 12 months of living expenses, so if you know what your needs category is and a little bit of needs turns out to be, let's say 2,000 per month for your entire family. You know you need to save between 12-24k in your emergency fund. I know it sounds like a lot of money, but you know one or two. layoffs in a family of you know one or two income earners that can really save your ass, you obviously know how to pay off debt, so if you have credit cards, you know student loans, things like that, these are debts that you should just crush using that 20 and I'll do another video on how to pay off debt using the debt avalanche and the debt snowball method okay and then obviously if you want to save for retirement, in my opinion this is one of the things that most Americans will suffer. 20 to 30 years from now because many of them just aren't focusing on retirement savings so I know a lot of these things sound like common sense but until they actually create a monthly budget knowing what their monthly net income breaking it down. for 50, 30 and 20 percent, you'd be surprised where the different dollars go for different categories, so unless it's not a want or a need, I would definitely put it in this 20 debt savings category, so that's it practically everything I have for you.

Guys, today I know this may not be earth-shattering information, but until you actually write it down and understand where each of your after-tax dollars goes, you might be surprised, so know this video is a little shorter . aside, but again, it's very important information, so if you have a friend or family member who would benefit, please share it with them. I implore you that many people are benefiting greatly from these videos and I am not asking for anything. In return, just share it, thank you all very much and have a prosperous day.