2023-09-25 00:17:16
Monday, September 25, 2023, 00:17
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“I have a month left at the end of my salary.” It is the good-humoured lament of someone who normally has to get by on a meager salary. Even in these cases, it is possible to put into practice the 50/30/20 rule, which basically consists of adjusting our monthly budget so that we can put 20% of our salary in the piggy bank to face unforeseen expenses or, simply, make sure a more peaceful retirement.
This rule was popularized by Elisabeth Warren – a US senator and expert in bankruptcy law – and her daughter Amelia. Warren developed her theory in the book ‘All your worth: the ultimate lifetime money plan’.
The premise of this plan is simple, at least in theory. It involves dividing the monthly budget into three sections: 50% for essential expenses, 30% for leisure and whims, and the remaining 20% for savings.
As BBVA explains, “to alleviate the feeling of losing purchasing power” it is important to do a couple of things every month. First of all, “discount the savings percentage as soon as you receive the payroll”, contrary to what is usually usual (subtract expenses from income and put what is left in the piggy bank). Thus, we will start from the real amount that will have to be dealt with during the month.
And then deposit that 20% into an account that is not the usual one. “This will show how, month after month, the amount in that account grows with the money deposited plus interest.”
But before applying the rule, we must calculate how much money we have each month: what we pay as payroll if we are employed, and what we have left after subtracting the expenses of professional activity and taxes if we are employed. autonomous worker.
Review and classify expenses
Review expenses, either with the bank book in hand, or with any of the many tools that can be found on the internet. Once computed, they must be classified in one of the three sections of the 50/30/20 rule.
Basic expenses are usually:
-Mortgage or rent payment
-Usual household supply expenses: electricity, water, community fee, etc.
-Feeding
-Education
-Transport
-Dress and footwear (although this item is more fluctuating and can also be part of non-essential expenses)
In the 30% of the box of expenses that are expendable, deferred, or susceptible to being cut, we find those related to leisure (going to the cinema, the theater, football, dining at a restaurant or taking a trip). From there, ‘only’ remains to adjust these expenses as much as possible, where the key to savings really is.
To focus and give more meaning to this adjustment plan, the Raisin savings platform advises “setting financial goals.” Also “periodically review and adjust” the budget as income and expenses change.
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