![]() ![]() A want is anything that’s not a basic need to survive. Multiply your monthly take-home pay by 0.3 to find the amount you have in this category. She suggests starting “by making an honest assessment of your spending and look for ways to improve and cut back.” 30% of Your Budget for Wants “People don’t realize that many of their needs are really classified as wants (such as cable and morning lattes) and they may blow this ratio quickly,” Andrea Woroch, a consumer and money-saving expert, told SmartAsset. It might be a need, but owning anything above a base model cell phone and basic phone plan tilts more toward a want. Trickier situations, such as whether your cell phone is a need or a want, take more thought. Health insurance, for example, is a need because you’ll incur fines if you forgo coverage. If you’re not sure what’s a need versus a want, consider the impact if you take it away. ![]() Therefore, it’s a need.īut that’s not an exhaustive list. Missing payments for either will get you in hot water. Other needs include child support and alimony. If you miss payments, your credit score’s negatively impacted. Housing, utilities, health insurance, groceries, transportation and prescriptions all count as needs. Some debt is considered a need as well, such as credit card payments or car payments. That number is the amount of money you’ll allocate for needs. 50% of Your Budget for Needsĭivide your monthly pay in half. If your income is less stable from month to month, you may want to find a budgeting method that works better for your situation. It’s important to note that the 50/30/20 budget assumes you bring home roughly the same amount of money each month. ![]() Now you know your monthly pay, let’s divvy it up according to the budget. If you have a health insurance plan or retirement contributions deducted from your paycheck, add those back in. You’ll start by calculating your monthly take-home pay. Parceling up your costs in this way can help you understand where your money is going more precisely. The 50/30/20 budget breaks your money up into three basic divisions: needs, wants and debt/savings. ![]()
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