ItвЂ™s the best place to sock theВ extra cash youвЂ™re saving. Savings accounts and budgets go hand-in-hand.вЂњTake it step by step though because itвЂ™s a lot easier to adjust to small changes than to a complete life overhaul.вЂќ Tips for Budgeting While saving 20% may not seem like a lot, you may be surprised once you put it into practice. Whatever your financial goals are, remember that making a plan is the best way to meet them.ДЇinally, Woroch cautions against jumping into the plan too quickly. Or, perhaps you add a percentage for charitable contributions. On the flip side, if youвЂ™re debt-free and have healthy savings, perhaps you can allow yourself more wants. If you want to tweak it to your personal financial goals, go right ahead! While you probably donвЂ™t want to dip below saving 50% for needs, you can always scale back wants and add more to your savings. You donвЂ™t have to feel tied to the 50/30/20 rule. While the вЂњneedsвЂќ category may have included a large portion of your essential must-pay debt (such as your credit card), this money is for any extra payments you can make once you put aside retirement or health savings account funds. Woroch even recommends you вЂњput В savings away first before paying for other luxuries.вЂќ A savings calculator can help you see how this money will grow over time.ДЄs for debt, this category includes student loans or other debt you want to put extra money toward paying off. Savings include retirement accounts, emergency funds and whatever other financial goals you have. For example, if your paycheck (after taxes) is $3,200 a month, youвЂ™d set aside $640 for debt and savings ($3,200 x 0.2). To find what you should set aside for debt and savings, multiply your take-home pay by 0.2. You may want to change your allocations if your goal is to build wealth or pay down debt as fast as possible. With the 50/30/20 budget, you allocate a larger percentage of your money for wants versus savings. This could mean high-speed internet in your apartment or leasing a large car instead of economy-sized. Where the line gets fuzzy is with expenses you may consider essential, but in reality, could live without. Vacations, cable and Netflix, gym memberships and dining out all count as wants.В Salon visits and clothes shopping are included in the category, as well. A want is anything thatвЂ™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 вЂњby making an honest assessment of your spending and look for ways to improve and cut back.вЂќ 30% of Your Net Pay for Wants вЂњPeople donвЂ™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,вЂќ Andrea Woroch, a consumer and money-saving expert, told SmartAsset. ItВ 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 youвЂ™ll be fined if you forgo coverage. If youвЂ™re not sure whatвЂ™s a need versus a want, consider the impact if you take it away. Therefore, itвЂ™s a need.Д«ut thatвЂ™s not an exhaustive list. Missing payments for either will get you in hot water. Other needs include child support and alimony. IfВ you miss payments, your credit scoreвЂ™s negatively impacted. Housing, utilities, health insurance, groceries, transportation and prescriptions all count as needs.В Some debt is considered a need as well, such as credit card payments or car payments.

That number is the amount of money youвЂ™ll allocate for needs.

50% of Your Net Pay for NeedsДivide 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. ItвЂ™s important to note that the 50/30/20 budget assumes you bring home roughly the same amount of money each month.

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