Mastering the 50/20/30 principle of budgeting
SEE ALSO :The three P’s in businessHalf of your income should go to essential expenses like your rent, transport costs, groceries, water and electricity and other utility costs. Car and home insurance, medical aid and life cover fall under this category as well. One fifth of your earnings should go towards debt repayment, savings, and investments. This category also encompasses your emergency fund, your retirement plan, and any short-term savings goals like a holiday or new car. The last part of your income should go towards ‘wants’. These include television and cellphone contracts as well as entertainment, gym and holiday savings. The 50/20/30 principle is not a one size fits all formula, but you can use it as a guideline when evaluating your budget and spending to see where you need to cut down. It’s also very important that you don’t confuse essential expenses with lifestyle expenses. The two are worlds apart!
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