A Simple Budget Tip The 50/30/20 Rule
A simple way to budget your expenses with out doing too much calculating and thinking is to go by the 50/30/20 rule. This means 50% goes to fixed income, 30% towards discretionary spending, and 20% for savings. If you can get your total income salary before taxes to fit within these percentage you should have no problem affording your lifestyle.
Remember the secret to growing wealth is to live below your means, and never forget the 2 rules from Warren Buffet Rule Number 1. Never Lose Money! Rule Number 2. Never Forget Rule Number 1.
After you create a budget, you may be wondering what to do with all that money you saved. You can either keep it as an emergency fund or set aside a certain amount as an emergency fund and invest the rest.
Here is a brief explanation of investing. Investing is a broad term used meaning you spend your money or time to possibly make more money. The money used in investment should be money you will be fine with losing as, some investment strategy are very volatile like stocks and real estates while other investment strategy like bonds and CD savings are much more stable and safe but don't give you a huge return on your money if you only have a small sum of cash. You probably heard the saying more then once, "you must spend money to make money". Its true money isn't going to appear out of thin air with you doing nothing. OK, you do work and make money from that but you are still paying in the currency of Time, you also hear the other saying "time is money".Yes time is money, especially if you start young and invest at a young age that money over time can create you a lot of wealth and this is called compound intrest. Lets say you have $100 dollars, If you put that money into stocks and achieve a 10% annual growth return rate, in 8 years you will have $214.37. WOW Your money like, just doubled! but your saying 8 years for a $100 ehh... Now imagine if you had $100,000 and it doubled to $200,000 now thats a hudge difference isn't it? Thats why you hear people saying the rich get richer and poor are dumb because poor people spend money they don't have and accumulate what is called consumers debt. Trying to keep up with the Jones will end in a massive load of debt. Wheres the math?So you start with 100$ with a 10% annual growth by the end of the year, you will have $110 and if you continue to receive a 10% return by the end of that year,you will have $121 and if that continues with a 10% return, you will have $133.10 by the end of the year, continuing a 10% return your $133.10 will be worth $146.41 and from there continuing with 10% annual return you will have $161.05 at the end of the year, $177.16 by the end of that year, and $194.88 by the end of that year, and then $214.37 by the end of that year. Do you see where I am going with this?If you have any questions or need me to clarify anything please comment and let me know, It will help my blogging experience.
