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Conventional thinking states that you should spend first, then save what’s left over (assuming you’ve spent less than what you’ve earned over a given period of time). But why not turn that around? Socking away money at the beginning of the month, for instance, bypasses the temptation to spend those extra funds.

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The idea of establishing and following a budget may sound great, but actually doing it can be downright hard. Luckily, you don't have to hire an accountant or completely overhaul your lifestyle to rein in your spending. Here are a few tips to get you started.

1. FOCUS ON YOUR DEBT FIRST.

It's hard to save money if you're in the red. Before you start budgeting, come up with a plan to resolve outstanding bills, credit card payments, and any other lingering debts you might have. The sooner you get out of the negative, the more time you'll have to build the positive.

2. TRACK YOUR SPENDING FOR ONE WEEK.

There's no need to log your expenses for weeks and months at a time. Keep a detailed record of your spending for one week, and key patterns should emerge. Perhaps you're buying too much clothing, or eating out too often. Recognizing bad spending habits early on is important, and a lot more practical than counting every penny over the long run.

3. TECHNOLOGY IS AVAILABLE TO HELP- USE IT.

If you're not into the idea of spreadsheets or writing down expenses by hand, budgeting apps can help. They'll link into your credit card accounts, track your spending over time, and provide an easy-to-follow breakdown of what you're buying and where. They can also offer savings advice based on your results.

4. TARGET YOUR THREE WORST OFFENDERS.

Rather than count every dime, group your spending into categories and focus on the three most problematic ones. If you see that nearly half of your monthly expenses are going towards booze, shoes, and music downloads, for instance, address those first. Doing this is practical, efficient, and targets the specific behaviors that stand in the way of good budgeting.

5. SET INCREMENTAL GOALS.

Trying to address all of your bad habits at once will only lead to disappointment. Establish specific, attainable monthly goals that build upon one another. In the first month, for instance, set a goal of tracking expenses and identifying problem areas. In the second month, set a modest savings goal. Know that setbacks will happen-but don't let them derail your progress over the long run.

6. SHOP WITH A LIST.

Even if you're only going to the supermarket for milk and eggs, make a list. Doing so will make you conscious of what you need and intend to buy. It'll also shame you when you try to sneak that extra pint of ice cream into your basket. You know better!

7. SAVE FIRST, THEN SPEND.

Conventional thinking states that you should spend first, then save what's left over (assuming you've spent less than what you've earned over a given period of time). But why not turn that around? Socking away money at the beginning of the month, for instance, bypasses the temptation to spend those extra funds.

8. AUTOMATE YOUR SAVINGS.

Most banks will let you set automatic monthly transfers between your accounts and employers usually offer 401(k) and other diverted savings plans. Using these options will take the question of whether to save out of your hands, and will also hold you to a certain amount of savings each month. You may need to adjust the amounts over time, depending on your financial situation, but you should resist doing away with the transfers altogether.

9. SET UP SEPARATE ACCOUNTS.

Financial experts recommend dividing your earnings up into a few categories, or "buckets." A popular breakdown is the 50-20-30 plan, which allots 50 percent for necessities, 20 percent for long-term savings, and 30 percent for lifestyle expenditures. While it's probably not wise to use actual buckets, you can divide your earnings amongst a few bank accounts. You can even automate the process to make sure the right amounts are going to the right places.

10. CANCEL CATALOGUES AND NEWSLETTERS.

Temptations to spend are everywhere, and some of the most effective ones are delivered to your inbox and mailbox every day. You can sign up for services that will put a stop to unwanted catalogs, and most merchants that let you sign up for mailers and newsletters make it fairly simple to unsubscribe. It might be overkill to do away with all your subscriptions, but surely you don't need seventeen daily fashion newsletters.

11. DON'T GO IT ALONE.

Ultimately, you're responsible for developing your own budget and sticking to it. But friends and family can help you along with encouragement and tough love. So share your savings goals with at least one other person. Who knows, they might even offer you some good advice.

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The idea of establishing and following a budget may sound great, but actually doing it can be downright hard. Luckily, you don't have to hire an accountant or completely overhaul your lifestyle to rein in your spending. Here are a few tips to get you started. 1. FOCUS ON YOUR DEBT FIRST.

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This rule has to do with the decision to buy new vs. used. If you want to maximize your car's value, you should either buy used, or buy new and drive the car for ten years.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

Budgeting

The 50/30/20 rule

This is a popular rule for breaking down your budget. The 50-30-20 rule is 50% of your income for necessities, like housing and bills; 30% for wants, like dining or entertainment; and 20% for financial goals, like paying off debt or saving for retirement.

There are looser variations to this rule, like the 80-20 rule, in which you use 20% of your income for financial goals and spend 80 percent on everything else.

Why it works: If you're not sure where to start with a budget, breaking it up into these basic categories can be really helpful. Those percentages help create a balance between obligations, goals and splurges.

When it doesn't: If you're not earning much, you might not have the luxury of only spending half your income on necessities.

You can always make a budget that's more tailored to your situation-start from scratch and follow these budgeting steps to design a plan that works best for you.

Buying a vehicle

The 20/4/10 rule

When buying a car, you should put down at least 20%, keep your car loan limited to no more than four years (to avoid interest) and spend no more than 10% of your gross income on transportation costs.

Why it works: It keeps you from buying more vehicle than you can afford. Cars are expensive to maintain and this formula takes your ongoing vehicle budget into consideration by calculating total transportation costs. These costs include your car payment, parking, gas and insurance (which varies by vehicle type).

When it doesn't: Depending on your situation, these numbers might not be realistic for you. For example, you might spend more than 10% of your gross income on transportation because you have a long, gas-guzzling commute to a low-paying job. Since you need your car to work, you might look elsewhere in your budget to cut costs.

The 10-year rule

This rule has to do with the decision whether to buy a car new versus used. If you want to maximize your car's value, you should either buy used, or buy new and drive the car for ten years.

When it doesn't: A used car is more likely to break down and require repairs.
You'll want to make sure the maintenance isn't more expensive than the value of sticking with a used car.

Generally speaking, research is important in considering all the variables. Edmund's has an affordability calculator, and we've written about the four questions you should ask when deciding on a new versus used vehicle.

Homeownership

The 20% rule

You should put at least when buying a home.

When it doesn't: While this is commonly accepted as practical advice, opinions can vary. Some consider 20% unrealistic as it's an overwhelming amount to save.

The income rule

Don't buy a house that costs more than three years' worth of your gross annual income. Some variations say no more than two years; others say two and a half.

Why it works: It puts a ballpark limit on how much home you can (or should) afford.

These general rules give you an approximate amount to start with when thinking about homeownership. But there's a long list of expenses, including closing costs, to consider, too. And it all varies. Check out our list of homeownership expenses that you might overlook before you start looking.

Retirement

The 10% rule

"Save 10% of your income for retirement" is a very common rule of thumb.

Why it works: It gives people a simple number to work with. If you're young, just opened a 401(k), and you're not sure how much of your earnings to set aside, 10% is a good start.

When it doesn't: While 10% is a simple rule to follow, the percentage doesn't consider how much you'll actually need in retirement. It also doesn't consider how much you've currently saved. If you're playing catch-up, you'll probably need to save considerably more than 10% of your income. Similarly, if you want to retire early, or more lavishly, you'll likely need to save more than 10%.

The income rule

You should save 20x your gross annual income.

Why it works: It helps you focus on what you'll need in the future.

When it doesn't: It's more of a common benchmark than a one-size-fits-all formula. Your retirement expenses might differ from how much income you earn now, and depending on the lifestyle you plan to live, you may need a lot more (or less) than 20x your income.

These retirement rules offer ballpark numbers, but if you want a more accurate approach that considers all the variables, develop a detailed vision your retirement. Then, calculate how much that lifestyle will cost.

Student Loans

The first-year salary rule

You shouldn't take out more in student loans than you expect to make your first year on the job.

Why it works: It ensures you're taking out an affordable amount that you'll be able to repay.

When it doesn't: Skyrocketing tuition rates have made following this rule a challenge, as have unemployment rates right after graduation.

This is a sticky and complicated topic. As we're in the middle of a student debt crisis, not to mention a recession, it's easy to dismiss this rule. But it's important to have a realistic idea of what your income and repayment are going to look like after college, especially as it relates to your . You'll also want to compare the cost of an education at different universities to get a better idea of what you can afford.

Saving and investing

The 6-month emergency fund rule

You should have six months' worth of savings on hand in case of an emergency.

It's can be really hard to hear "you should save an emergency fund" when you're broke, so with that in mind here's a Lifehacker post on alternative ways to get some emergency cash.

The age rule for stocks

When investing, bonds are generally less risky than stocks. So the rule follows that the older you get, the less you should invest in stocks. To put a number on it, subtract your age from 120 ( the old rule was 100, but many experts now say 120 makes more sense); that's the percentage of your portfolio that should be invested in stocks.

Why it works: It gives you a general idea of what your asset allocation should look like, based on your age.

If you want to get a better idea of how much you should have saved in stocks and bonds, consider using an online tool like Portfolio Visualizer or Personal Capital to help you visualize your retirement planning.

Most of these rules are pretty solid, tried-and-true methods for planning your finances. But again, personal finance is, well, personal. Consider these rules a good starting point-to really stay on top of your finances, research and personalized planning is a necessity.

This story was originally published in December 2014 and was updated on October 30, 2020 to update links and include new information.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

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The budget cycle consists of four phases: (1) preparation and submission, (2) approval, (3) execution, and (4) audit and evaluation. The preparation and submission phase is the most difficult to describe because it has been subjected to the most reform efforts.

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You should have six months' worth of savings on hand in case of an emergency.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

Budgeting

The 50/30/20 rule

This is a popular rule for breaking down your budget. The 50-30-20 rule is 50% of your income for necessities, like housing and bills; 30% for wants, like dining or entertainment; and 20% for financial goals, like paying off debt or saving for retirement.

There are looser variations to this rule, like the 80-20 rule, in which you use 20% of your income for financial goals and spend 80 percent on everything else.

Why it works: If you're not sure where to start with a budget, breaking it up into these basic categories can be really helpful. Those percentages help create a balance between obligations, goals and splurges.

When it doesn't: If you're not earning much, you might not have the luxury of only spending half your income on necessities.

You can always make a budget that's more tailored to your situation-start from scratch and follow these budgeting steps to design a plan that works best for you.

Buying a vehicle

The 20/4/10 rule

When buying a car, you should put down at least 20%, keep your car loan limited to no more than four years (to avoid interest) and spend no more than 10% of your gross income on transportation costs.

Why it works: It keeps you from buying more vehicle than you can afford. Cars are expensive to maintain and this formula takes your ongoing vehicle budget into consideration by calculating total transportation costs. These costs include your car payment, parking, gas and insurance (which varies by vehicle type).

When it doesn't: Depending on your situation, these numbers might not be realistic for you. For example, you might spend more than 10% of your gross income on transportation because you have a long, gas-guzzling commute to a low-paying job. Since you need your car to work, you might look elsewhere in your budget to cut costs.

The 10-year rule

This rule has to do with the decision whether to buy a car new versus used. If you want to maximize your car's value, you should either buy used, or buy new and drive the car for ten years.

When it doesn't: A used car is more likely to break down and require repairs.
You'll want to make sure the maintenance isn't more expensive than the value of sticking with a used car.

Generally speaking, research is important in considering all the variables. Edmund's has an affordability calculator, and we've written about the four questions you should ask when deciding on a new versus used vehicle.

Homeownership

The 20% rule

You should put at least when buying a home.

When it doesn't: While this is commonly accepted as practical advice, opinions can vary. Some consider 20% unrealistic as it's an overwhelming amount to save.

The income rule

Don't buy a house that costs more than three years' worth of your gross annual income. Some variations say no more than two years; others say two and a half.

Why it works: It puts a ballpark limit on how much home you can (or should) afford.

These general rules give you an approximate amount to start with when thinking about homeownership. But there's a long list of expenses, including closing costs, to consider, too. And it all varies. Check out our list of homeownership expenses that you might overlook before you start looking.

Retirement

The 10% rule

"Save 10% of your income for retirement" is a very common rule of thumb.

Why it works: It gives people a simple number to work with. If you're young, just opened a 401(k), and you're not sure how much of your earnings to set aside, 10% is a good start.

When it doesn't: While 10% is a simple rule to follow, the percentage doesn't consider how much you'll actually need in retirement. It also doesn't consider how much you've currently saved. If you're playing catch-up, you'll probably need to save considerably more than 10% of your income. Similarly, if you want to retire early, or more lavishly, you'll likely need to save more than 10%.

The income rule

You should save 20x your gross annual income.

Why it works: It helps you focus on what you'll need in the future.

When it doesn't: It's more of a common benchmark than a one-size-fits-all formula. Your retirement expenses might differ from how much income you earn now, and depending on the lifestyle you plan to live, you may need a lot more (or less) than 20x your income.

These retirement rules offer ballpark numbers, but if you want a more accurate approach that considers all the variables, develop a detailed vision your retirement. Then, calculate how much that lifestyle will cost.

Student Loans

The first-year salary rule

You shouldn't take out more in student loans than you expect to make your first year on the job.

Why it works: It ensures you're taking out an affordable amount that you'll be able to repay.

When it doesn't: Skyrocketing tuition rates have made following this rule a challenge, as have unemployment rates right after graduation.

This is a sticky and complicated topic. As we're in the middle of a student debt crisis, not to mention a recession, it's easy to dismiss this rule. But it's important to have a realistic idea of what your income and repayment are going to look like after college, especially as it relates to your . You'll also want to compare the cost of an education at different universities to get a better idea of what you can afford.

Saving and investing

The 6-month emergency fund rule

You should have six months' worth of savings on hand in case of an emergency.

It's can be really hard to hear "you should save an emergency fund" when you're broke, so with that in mind here's a Lifehacker post on alternative ways to get some emergency cash.

The age rule for stocks

When investing, bonds are generally less risky than stocks. So the rule follows that the older you get, the less you should invest in stocks. To put a number on it, subtract your age from 120 ( the old rule was 100, but many experts now say 120 makes more sense); that's the percentage of your portfolio that should be invested in stocks.

Why it works: It gives you a general idea of what your asset allocation should look like, based on your age.

If you want to get a better idea of how much you should have saved in stocks and bonds, consider using an online tool like Portfolio Visualizer or Personal Capital to help you visualize your retirement planning.

Most of these rules are pretty solid, tried-and-true methods for planning your finances. But again, personal finance is, well, personal. Consider these rules a good starting point-to really stay on top of your finances, research and personalized planning is a necessity.

This story was originally published in December 2014 and was updated on October 30, 2020 to update links and include new information.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

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This is a popular rule for breaking down your budget. The 50-30-20 rule puts 50 percent of your income toward necessities, like housing and bills. Twenty percent should then go toward financial goals, like paying off debt or saving for retirement. Finally, thirty percent of your income can be allocated to wants, like dining or entertainment.

There are also variations to this rule, like the 80-20 rule, in which you use 20 percent of your income for financial goals, then spend 80 percent on everything else.

Why It Works: If you're not sure where to start with a budget, breaking it up into these basic categories can be really helpful. Those percentages help create a balance between obligations, goals and splurges.Link

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https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

50% On necessities
30% On thing you want such as eating at restaurants and  clothing
20% On savings

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You shouldn't take out more in student loans than you expect to make your first year on the job.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

Budgeting

The 50/30/20 rule

This is a popular rule for breaking down your budget. The 50-30-20 rule is 50% of your income for necessities, like housing and bills; 30% for wants, like dining or entertainment; and 20% for financial goals, like paying off debt or saving for retirement.

There are looser variations to this rule, like the 80-20 rule, in which you use 20% of your income for financial goals and spend 80 percent on everything else.

Why it works: If you're not sure where to start with a budget, breaking it up into these basic categories can be really helpful. Those percentages help create a balance between obligations, goals and splurges.

When it doesn't: If you're not earning much, you might not have the luxury of only spending half your income on necessities.

You can always make a budget that's more tailored to your situation-start from scratch and follow these budgeting steps to design a plan that works best for you.

Buying a vehicle

The 20/4/10 rule

When buying a car, you should put down at least 20%, keep your car loan limited to no more than four years (to avoid interest) and spend no more than 10% of your gross income on transportation costs.

Why it works: It keeps you from buying more vehicle than you can afford. Cars are expensive to maintain and this formula takes your ongoing vehicle budget into consideration by calculating total transportation costs. These costs include your car payment, parking, gas and insurance (which varies by vehicle type).

When it doesn't: Depending on your situation, these numbers might not be realistic for you. For example, you might spend more than 10% of your gross income on transportation because you have a long, gas-guzzling commute to a low-paying job. Since you need your car to work, you might look elsewhere in your budget to cut costs.

The 10-year rule

This rule has to do with the decision whether to buy a car new versus used. If you want to maximize your car's value, you should either buy used, or buy new and drive the car for ten years.

When it doesn't: A used car is more likely to break down and require repairs.
You'll want to make sure the maintenance isn't more expensive than the value of sticking with a used car.

Generally speaking, research is important in considering all the variables. Edmund's has an affordability calculator, and we've written about the four questions you should ask when deciding on a new versus used vehicle.

Homeownership

The 20% rule

You should put at least when buying a home.

When it doesn't: While this is commonly accepted as practical advice, opinions can vary. Some consider 20% unrealistic as it's an overwhelming amount to save.

The income rule

Don't buy a house that costs more than three years' worth of your gross annual income. Some variations say no more than two years; others say two and a half.

Why it works: It puts a ballpark limit on how much home you can (or should) afford.

These general rules give you an approximate amount to start with when thinking about homeownership. But there's a long list of expenses, including closing costs, to consider, too. And it all varies. Check out our list of homeownership expenses that you might overlook before you start looking.

Retirement

The 10% rule

"Save 10% of your income for retirement" is a very common rule of thumb.

Why it works: It gives people a simple number to work with. If you're young, just opened a 401(k), and you're not sure how much of your earnings to set aside, 10% is a good start.

When it doesn't: While 10% is a simple rule to follow, the percentage doesn't consider how much you'll actually need in retirement. It also doesn't consider how much you've currently saved. If you're playing catch-up, you'll probably need to save considerably more than 10% of your income. Similarly, if you want to retire early, or more lavishly, you'll likely need to save more than 10%.

The income rule

You should save 20x your gross annual income.

Why it works: It helps you focus on what you'll need in the future.

When it doesn't: It's more of a common benchmark than a one-size-fits-all formula. Your retirement expenses might differ from how much income you earn now, and depending on the lifestyle you plan to live, you may need a lot more (or less) than 20x your income.

These retirement rules offer ballpark numbers, but if you want a more accurate approach that considers all the variables, develop a detailed vision your retirement. Then, calculate how much that lifestyle will cost.

Student Loans

The first-year salary rule

You shouldn't take out more in student loans than you expect to make your first year on the job.

Why it works: It ensures you're taking out an affordable amount that you'll be able to repay.

When it doesn't: Skyrocketing tuition rates have made following this rule a challenge, as have unemployment rates right after graduation.

This is a sticky and complicated topic. As we're in the middle of a student debt crisis, not to mention a recession, it's easy to dismiss this rule. But it's important to have a realistic idea of what your income and repayment are going to look like after college, especially as it relates to your . You'll also want to compare the cost of an education at different universities to get a better idea of what you can afford.

Saving and investing

The 6-month emergency fund rule

You should have six months' worth of savings on hand in case of an emergency.

It's can be really hard to hear "you should save an emergency fund" when you're broke, so with that in mind here's a Lifehacker post on alternative ways to get some emergency cash.

The age rule for stocks

When investing, bonds are generally less risky than stocks. So the rule follows that the older you get, the less you should invest in stocks. To put a number on it, subtract your age from 120 ( the old rule was 100, but many experts now say 120 makes more sense); that's the percentage of your portfolio that should be invested in stocks.

Why it works: It gives you a general idea of what your asset allocation should look like, based on your age.

If you want to get a better idea of how much you should have saved in stocks and bonds, consider using an online tool like Portfolio Visualizer or Personal Capital to help you visualize your retirement planning.

Most of these rules are pretty solid, tried-and-true methods for planning your finances. But again, personal finance is, well, personal. Consider these rules a good starting point-to really stay on top of your finances, research and personalized planning is a necessity.

This story was originally published in December 2014 and was updated on October 30, 2020 to update links and include new information.

# data[].attributes.attachment_link.description
Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

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- The 28/36 rule states that a household should spend no more than 28% of gross income on total housing expenses, and no more than 36% on all debt

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1.Calculate expenses. Your first order of business is finding out exactly how much you're spending each month.
2.Determine your income.
3. Set savings and debt payoff goals
4. Record spending and track progress
5. Be realistic

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50 percent of your income toward necessities, like housing and bills. 20 percent should then go toward financial goals, like paying off debt or saving for retirement. Finally, thirty percent of your income can be allocated to wants, like dining or entertainment.

# data[].attributes.attachment_link.readable_text
Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

Budgeting

The 50/30/20 rule

This is a popular rule for breaking down your budget. The 50-30-20 rule is 50% of your income for necessities, like housing and bills; 30% for wants, like dining or entertainment; and 20% for financial goals, like paying off debt or saving for retirement.

There are looser variations to this rule, like the 80-20 rule, in which you use 20% of your income for financial goals and spend 80 percent on everything else.

Why it works: If you're not sure where to start with a budget, breaking it up into these basic categories can be really helpful. Those percentages help create a balance between obligations, goals and splurges.

When it doesn't: If you're not earning much, you might not have the luxury of only spending half your income on necessities.

You can always make a budget that's more tailored to your situation-start from scratch and follow these budgeting steps to design a plan that works best for you.

Buying a vehicle

The 20/4/10 rule

When buying a car, you should put down at least 20%, keep your car loan limited to no more than four years (to avoid interest) and spend no more than 10% of your gross income on transportation costs.

Why it works: It keeps you from buying more vehicle than you can afford. Cars are expensive to maintain and this formula takes your ongoing vehicle budget into consideration by calculating total transportation costs. These costs include your car payment, parking, gas and insurance (which varies by vehicle type).

When it doesn't: Depending on your situation, these numbers might not be realistic for you. For example, you might spend more than 10% of your gross income on transportation because you have a long, gas-guzzling commute to a low-paying job. Since you need your car to work, you might look elsewhere in your budget to cut costs.

The 10-year rule

This rule has to do with the decision whether to buy a car new versus used. If you want to maximize your car's value, you should either buy used, or buy new and drive the car for ten years.

When it doesn't: A used car is more likely to break down and require repairs.
You'll want to make sure the maintenance isn't more expensive than the value of sticking with a used car.

Generally speaking, research is important in considering all the variables. Edmund's has an affordability calculator, and we've written about the four questions you should ask when deciding on a new versus used vehicle.

Homeownership

The 20% rule

You should put at least when buying a home.

When it doesn't: While this is commonly accepted as practical advice, opinions can vary. Some consider 20% unrealistic as it's an overwhelming amount to save.

The income rule

Don't buy a house that costs more than three years' worth of your gross annual income. Some variations say no more than two years; others say two and a half.

Why it works: It puts a ballpark limit on how much home you can (or should) afford.

These general rules give you an approximate amount to start with when thinking about homeownership. But there's a long list of expenses, including closing costs, to consider, too. And it all varies. Check out our list of homeownership expenses that you might overlook before you start looking.

Retirement

The 10% rule

"Save 10% of your income for retirement" is a very common rule of thumb.

Why it works: It gives people a simple number to work with. If you're young, just opened a 401(k), and you're not sure how much of your earnings to set aside, 10% is a good start.

When it doesn't: While 10% is a simple rule to follow, the percentage doesn't consider how much you'll actually need in retirement. It also doesn't consider how much you've currently saved. If you're playing catch-up, you'll probably need to save considerably more than 10% of your income. Similarly, if you want to retire early, or more lavishly, you'll likely need to save more than 10%.

The income rule

You should save 20x your gross annual income.

Why it works: It helps you focus on what you'll need in the future.

When it doesn't: It's more of a common benchmark than a one-size-fits-all formula. Your retirement expenses might differ from how much income you earn now, and depending on the lifestyle you plan to live, you may need a lot more (or less) than 20x your income.

These retirement rules offer ballpark numbers, but if you want a more accurate approach that considers all the variables, develop a detailed vision your retirement. Then, calculate how much that lifestyle will cost.

Student Loans

The first-year salary rule

You shouldn't take out more in student loans than you expect to make your first year on the job.

Why it works: It ensures you're taking out an affordable amount that you'll be able to repay.

When it doesn't: Skyrocketing tuition rates have made following this rule a challenge, as have unemployment rates right after graduation.

This is a sticky and complicated topic. As we're in the middle of a student debt crisis, not to mention a recession, it's easy to dismiss this rule. But it's important to have a realistic idea of what your income and repayment are going to look like after college, especially as it relates to your . You'll also want to compare the cost of an education at different universities to get a better idea of what you can afford.

Saving and investing

The 6-month emergency fund rule

You should have six months' worth of savings on hand in case of an emergency.

It's can be really hard to hear "you should save an emergency fund" when you're broke, so with that in mind here's a Lifehacker post on alternative ways to get some emergency cash.

The age rule for stocks

When investing, bonds are generally less risky than stocks. So the rule follows that the older you get, the less you should invest in stocks. To put a number on it, subtract your age from 120 ( the old rule was 100, but many experts now say 120 makes more sense); that's the percentage of your portfolio that should be invested in stocks.

Why it works: It gives you a general idea of what your asset allocation should look like, based on your age.

If you want to get a better idea of how much you should have saved in stocks and bonds, consider using an online tool like Portfolio Visualizer or Personal Capital to help you visualize your retirement planning.

Most of these rules are pretty solid, tried-and-true methods for planning your finances. But again, personal finance is, well, personal. Consider these rules a good starting point-to really stay on top of your finances, research and personalized planning is a necessity.

This story was originally published in December 2014 and was updated on October 30, 2020 to update links and include new information.

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Rules of thumb are a good starting point for getting your finances on track, so we've put together ten good tips to follow. However, since everyone's situation is different, we've also included scenarios in which these rules are most applicable.

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Your 60% is the main color for your room. Most likely the 60% in a living room would be most of your walls, large accent pieces like area rugs, and perhaps a sofa. The idea is that the 60% color anchors the space and also serves as a backdrop for what comes next. link

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To lower impulse spending, buy items if you have wanted them for more than 30 days.
https://www.getrichslowly.org/control-impulse-spending-with-the-30-day-rule/

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Step One: Calculate Your After-Tax Income. ...

Step Two: Limit Your Needs to 50 Percent of Your After-Tax Income. ...

Step Three: Limit Your "Wants" to 30 Percent. ...

Step Four: Spend 20 Percent on Savings and Debt Repayments.

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The 50/30/20 Rule of Thumb for Budgeting

Step One: Calculate Your After-Tax Income. ...

Step Two: Limit Your Needs to 50 Percent of Your After-Tax Income. ...

Step Three: Limit Your "Wants" to 30 Percent. ...

Step Four: Spend 20 Percent on Savings and Debt Repayments.

https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

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The first part refers to your overall debt. Excluding mortgage debt, you should keep your borrowing total below 20% of your annual after-tax income. This includes credit cards and debts such as student loans, as well as car loans and any similar installment debt. Link

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70% is for monthly expenses (anything you spend money on)

20% goes into savings, unless you have pressing debt (see below for definition) in which case it goes toward debt first.

10% goes to donation/tithing, or investments, retirement, saving for college.

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- The 20/10 rule is something to help you figure out how much money you should be spending per purchase you make.
- You must put at least 20 percent down on your purchase, and you must keep the total monthly purchase expenses
- this includes principal and interest payments as well as insurance, under 10 percent of your gross income for the month.

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-   is a simple method to control impulse spending
" Here's how it works: Whenever you feel the urge to splurge — whether it's for new shoes, a new video game, or a new car — force yourself to stop. If you're already holding the item, put it back."

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Your budget should be split like this:
- 50% on needs
- 30% on wants
- 20% on savings

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The 50/30/20 rule of thumb is a way to allocate your budget according to three categories: needs, wants, and financial goals. It's not a hard-and-fast rule but rather a rough guideline to help you build a financially sound budget.

To better understand how to apply the rule, we'll look at its background, how it works, and its limitations, and we'll go through an example. In other words, we'll show you how and why to set up a budget using the 50/30/20 rule of thumb yourself.

What Is the 50/30/20 Rule of Thumb?

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your after-tax income to the following categories.

Needs are what you can't live without, or at least not very easily. They include things like:

Rent

Groceries

Utilities, such as electricity, water, and sewer service

Wants are what you desire but don't actually need in order to survive. They might include:

Hobbies

Vacations

Dining out

Digital and streaming services like Netflix and Hulu

20% to Financial Goals

This category covers two main areas:

All savings, such as retirement contributions, saving for a house, and setting money aside in a 529 college savings plan (note that contributions to a 401(k) come from your pre-tax income)

Debt payments

Because this is just a guideline for planning your budget, you'll need to supplement it with something to monitor spending, such as a budget tracker like YNAB (You Need a Budget), Mint, or Quicken. You can then set the 50/30/20 percentages as targets within whichever budget tracker you prefer.

Where Does the 50/30/20 Rule of Thumb Come From?

The 50/30/20 rule was popularized by Senator Elizabeth Warren (a Harvard law professor when she coined the term) and her daughter, Amelia Warren Tyagi, in the book All Your Worth: The Ultimate Lifetime Money Plan. It was designed as a rough rule of thumb for working-class families to plan their spending in order to prepare for the future and unforeseen circumstances.

How to Use the 50/30/20 Rule of Thumb for Budgeting

Most people save too little, and unknowingly spend too much. The 50/30/20 rule of thumb is a way to become aware of your financial habits and limit overspending and under-saving. By spending less on the things that don't matter that much to you, you can save more for the things that do.

Here's how it works:

1. Calculate your monthly income: Add up how much you receive in your bank account each month. If you have a workplace retirement plan, find out how much is withheld, and add that amount back in with your take-home pay. If you pay estimated taxes, reduce your monthly income amount accordingly.

2. Calculate a spending threshold for each category: Multiply your take-home pay by 0.50 (for needs), 0.30 (for wants), and 0.20 (for financial goals) to see how much you should ideally spend in each category.

3. Plan your budget around these numbers: Think of these three categories as "buckets" that you can fill with monthly expenses. List and tally your monthly expenses under the category that each falls into and see whether you're spending less than the monthly targets you established in the prior step.

4. Follow your budget: Track your expenses each month, and make changes where needed, in order to stick to your spending thresholds going forward.

An Example of the 50/30/20 Rule of Thumb

Here's an example using the steps above:

1. Calculate your monthly income: Let's say you and your spouse have a total of $4,787 deposited into your bank account each month from your jobs. You both check your pay stubs and see that a total of $532 was taken out for 401(k) contributions. This means that together, your monthly income is $5,319 ($4,787 + $532).

2. Calculate a spending threshold for each category: Based on the 50/30/20 rule, the amount you should allocate to "needs" is $2,659 ($5,319 x 0.50). The amount you should allocate to "wants" is $1,596 ($5,319 x 0.30). The amount you should allocate to financial goals is $1,064 ($5,319 x 0.20). Since you've already contributed $532 to your 401(k)s, use the remaining $532 to pay down debt or save for other financial goals.

3. Plan your budget around these numbers: Go through your budget to either plan out your spending or see how well it is already aligned with these targets.

Why the 50/30/20 Rule of Thumb Generally Works

Figuring out your finances is confusing, and it's often hard to know where to start. That's one reason the 50/30/20 rule of thumb works so well: It's an easy way to get a handle on something that can otherwise be intimidating.

Even if you don't take it any further by tracking how well you stick to these targets, it's still a good way to take your financial pulse.

Grain of Salt

Like any rule of thumb, it's a good idea to take the 50/30/20 rule of thumb with a grain of salt.

Potential for Gray Areas

It's sometimes hard to sort out your spending according to three categories. Everyone needs to eat, for example, but some groceries fall into the wants category (like sugary sodas and unhealthy snacks).

Can Be Difficult for Low-Income People

If you're earning just enough to make ends meet, you may struggle to save 20% of your income regardless of how you live, especially if you're supporting a family.

Savings Might Not Be Enough

On the flip side, if you have big goals, like retiring early or buying a house in a high-income area, 20% might not be enough.

For example, the average home price of a house in San Francisco was more than $1.6 million in June 2022. You would need to save, on average, $320,000 to afford a 20% down payment there. Your down payment would be more than 70% of the total cost of an average-priced home nationwide in 2021.

You Still Need to Track Your Budget

The 50/30/20 budget rule is only one piece of the budgeting puzzle. It's good to shoot for these percentages, but unless you track your spending, you'll never know whether you're actually hitting them.

The 50/30/20 Rule of Thumb vs. Other Budgeting Methods

The 50/30/20 rule of thumb isn't the only game in town. Here are a few other budgeting techniques that might work better for you:

The 80/20 Rule: With this method, you immediately set aside 20% of your income for savings. The other 80% is yours to spend on whatever you want, with no tracking involved.

The 70/20/10 Rule: This rule is similar to the 50/30/20 rule of thumb, but you instead parse out your budget as follows: 70% to living expenses, 20% to debt payments, and 10% to savings.

Frequently Asked Questions (FAQs)

How does tithing figure into the 50/30/20 rule?

As with any rule of thumb, you'll need to adjust it to fit your specific circumstance. When it comes to tithing or any other religious expense, individuals can decide for themselves whether that's something they "want" or "need."

Where does credit card debt go in the 50/30/20 rule?

Paying down debt is considered a financial goal. That means you should allocate 20% of your budget toward some combination of paying down debt and saving for the future.

How much of your paycheck should you spend with the 50/30/20 rule?

The 50/30/20 rule doesn't specify how much of each paycheck you should spend. The percentage of your paycheck that you spend or save largely depends on the 20% financial goal category. If your main financial goal is to reduce debt, you'll be spending more of your paycheck on that. If your main financial goal is to save up an emergency fund, then you'll be saving more of your paycheck.

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Keep Your Budget Simple With the 50/30/20 Rule

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The 50/30/20 rule of thumb is a way to allocate your budget according to three categories: needs, wants, and financial goals. It's not a hard-and-fast rule but rather a rough guideline to help you build a financially sound budget.

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Find a relevant article and summarize the rules into 1-5 bullet points

Use the "link" option to link your source for the class to use.