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Click the link in your description to download and improve your max performance. At this point, we all know we should be following a budget, it's the first rule of personal finance.

But while it's easy to drill into our minds, it's a little harder to put into practice. Enter the 50/30/20 budget rule. This is a simple, easy to implement rule that leaves you with guaranteed savings at the end of the day, which is precisely why I love and recommend it to so many of my friends.

What is the 50/30/20 budget rule? The 50/30/20 budgeting rule has been around for a while, though it was popularized in Senator Elizabeth Warren's book, All Your Worth. The ultimate lifetime money plan, this technique breaks down your necessary expenses, leisure expenses, and savings into percentage categories of your salary.

So 50% of your salary should go towards necessities. Think rent or mortgage payments, car payments and gas, or public transportation, necessary groceries, utilities, and debt. Then 20% of your salary should go toward savings.

This includes retirement accounts like a 401k or an IRA, as well as an emergency savings fund or investment accounts. You decide how to divvy up this 20%. If your company offers a 401k match on 5% of your salary, for example, you may put 5% into your retirement account, 5% into an investment account, and another 10% into an emergency savings fund.

It's entirely your choice. But 20% must be saved. Note that some experts include debt repayment in the savings portion of this budget, rather than in necessities.

Finally, 30% of your salary is for leisure spending. So this is the portion of your grocery bill that would go towards wine, or the part of your salary that you set aside to eat out at restaurants, travel and buy that $5 latte. Essentially, this 30% of your income is entirely for you.

This includes a gym membership, a car upgrade, furniture for your apartment, outside of a better kitchen essentials, charitable donations, therapy, hobbies, the GRE, et cetera. Why use the 50/30/20 budget rule? For me, the 50/30/20 budget rule is a simple technique that guarantees that I'm saving 20% of my paycheck and must live within a certain means without being too restrictive.

If my rent, transportation, utilities, grocery and loan payments exceed 50% of my paycheck, then I need to either one, consider getting a lucrative side hustle to grow my total salary in a meaningful way, or negotiate a raise, or two, reduce my necessary payments by auditing my spending. This may include downsizing my apartment to pay less rent or owning a cheaper car. This rule is adaptable to your location since it operates on a percent of your salary base.

So I can stick to the same budgeting technique even if I moved across the country. Most importantly, it allows me to spend 30% of my salary guilt free. I already know where the remaining 70% of my salary is going.

So I can use the rest to enrich my life and actually live, not merely save every penny. In a society that berates us for buying a $5 latte while failing to equip us with investment knowledge that could actually enable our wealth to grow, it's so important to spend money on yourself. Whether it's your physical health, a gym membership, nourishing meals at a restaurant with friends, traveling to beautiful destinations, mental health, therapy, a luxurious spa day, or emotional health, a best friend's wedding, visiting family.

This rule is best for people who want to make savings a priority. Genuinely setting aside money into an IRA or a retirement account in addition to a savings account every month and have minimal debt. When I was paying off my student loans, it was personally tough to justify spending 30% of my salary on leisure and keeping my debt payments to the 50% of my salary that included necessities still.

What I like about this rule is that you can easily adjust it. Saving 30% of your salary in a particular month and cutting down leisure your spending to just 20%. Instead, contributing more of your salary to your loan payments, no budgeting technique is set in stone.

But this is an easier one to adapt and adjust than others. I highly recommend tracking your money at all times, but if you specifically follow 50/30/20, here are some tips on how to track and calculate your spending. Suppose I take home 5,000 net a month, a.k.a, the money I take home after tax deductions, then using the 50/30/20 budget rule, 2,500 of my monthly salary would go towards necessities, 1,500 toward leisure spending, and the remaining 1,000 towards savings.

For necessities 50%, I subtract my monthly rent, utilities, and transportation payments typically, 2,150 total, to arrive in my grocery budget for the month 350. I then divvy up that amount for my groceries per week, which is typically around 85 a week. For savings 20%, I typically automate 5% of my salary to investments, another 5% to retirement, and 10% to my emergency savings fund which is in a high yield savings account.

Finally, I subtract my monthly recurring leisure spending 30%, from the 1,500 I have allotted for the month. For me this includes a gym membership, biweekly therapy appointments, Netflix and Spotify subscriptions, and 150 which I contribute to a travel savings fund. Right now saving for a friend's destination wedding.

The remaining amount I then divide among each week to arrive at my weekly leisure spending for restaurants, hikes, happy hours, or shopping. By having an Excel spreadsheet that automatically calculates your recurring monthly expenses, rent, gym, et cetera, and then a lot of those expenditures into the correct category, you can arrive at the remaining amount you have to spend within each category per week. For me, I like having a weekly grocery or restaurant budget to work off of.

But if a monthly or biweekly budget works best for you, you can adapt your budget accordingly. If you need help figuring out if this budget method is right for you or how to get started, check out the template linked the description of this video. One of the best ways to save money in the long run is to take care of the items you already have especially, expensive electronics.

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