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Get financially savvy with the 50/30/20 rule

No matter how much we’re earning, very few of us can escape the impact of the rising cost of living. That’s why it’s essential to use practical tools that make building lasting wealth as easy as 50/30/20.

In a world where lasting financial security often seems as unlikely as a date with Bradley Cooper, we’re often left with limited funds for those nice-to-haves. Yet, you’re not asking for too much… at least when it comes to your finances. You deserve to reap the benefits of your hard-earned funds. As people in the business of making the most of money, we’re sharing some valuable lessons.

The rule of 50/30/20

Want to know more about the rule of 50/30/20? Basically, it’s about dividing your net income into the following three buckets:

  1. 50% to needs
  2. 30% to wants
  3. 20% to savings

Needs are those inescapable living expenses, things like bills, groceries, petrol, medical aid, school fees, etc. Be accurate about what these things really cost – and how you may be able to reduce these expenses – for this exercise to work.

Wants are not vital, although at times they may feel that way. These include the fun aspects of life like entertainment, retail therapy and your daily Seattle coffee fix. To stick to the 30% limit, confront those uncomfortable truths – can you really afford that December Mauritius getaway? Yes, spoil yourself, but do it with the big picture in mind.

Savings are all about future you. We may live in a world of immediate gratification but how much money will you need in 10 years? Or 20? This bucket is about paying off debt, making wise investments and ensuring you’re building financial stability and planning for your long-term goals.

Define what fills each of your buckets and hold yourself accountable.

Five financial lessons

Through our years working in the business of wealth, we’ve learned some home truths. These include:

  1. It’s ok to say no. Haven’t budgeted for that ladies’ weekend? Or that business associate’s five-star destination wedding? Don’t go.
  2. It’s also ok to say yes – to yourself. Save for tomorrow but ensure you enjoy some of your money today.
  3. See yourself as an investor. You may win, you may lose but with the right advice tailored to your individual risk profile you can make a long-term commitment to growing your wealth.
  4. Ask for that raise – know your worth.
  5. Women live longer so save for retirement as early as possible.

SOURCES:

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