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The Benefits Of 60-20-20 Rule To Manage Finance

With numerous budgeting methods, the entire process of budgeting can be overwhelming. However, the 60-20-20 is a simple budgeting technique you can try without a headache. Before we dive into its discussion in detail, we recommend you look at the current spending habits. Prior to implementing any budgeting technique, it is essential to note the current expenses and income. There are many apps which can help you to make a note of it. Once the data is available, you can use the 60-20-20 rule. 

The 60-20-20 Rule

Firstly, 60-20-20 is a percentage-based budgeting technique. Each number represents a portion of the income. According to the 60-20-20 rules, 60% of the income can be spent by the person on different expenses. 20% of the income should contribute to financial goals like savings, investments, emergency funds and debt reduction. Finally, the other 20% of the income goes into discretionary spending, including travel, buying Lottery Sambad tickets, eating out and entertainment spending. 

To explain it further, if your income is $1000, you should use $600 on essential spending like rent and bills. You can additionally spend $200 on discretionary spending, like watching a movie or Bodoland Lottery tickets. Lastly, 20% of the income, which is $200, should go towards saving. Also, it is a very flexible budgeting technique. Therefore, feel free to make minor adjustments to suit your financial requirements. It is better to make minor adjustments than abandoning the entire budgeting technique altogether. 

The Benefits Of The 60-20-20 Budgeting Technique 

The 60-20-20 provides immense freedom to manage the expense of an individual. In a way, it gives room for flexible spending. It is why implementing the 60-20-20 rule is more manageable than other budgeting techniques. Also, it allows you to save 20% each month without getting overwhelmed. Once 20% of the income is saved or invested, the compounding effect starts working on the money to increase itself. 

We recommend you include the after-tax payment to apply the 60-20-20 rule to avoid overestimating the income. Furthermore, you should check whether your income and living standard suit this budgeting technique's requirements. 

Who Should Use The 60-20-20 Budgeting Rule?

It is a beginner-friendly budgeting technique. Therefore, if you are new to the budgeting system, you can use the 60-20-20 budgeting rule without feeling overwhelmed. You can create three different accounts or separate the money into the same account to avoid counting every dollar you spend. 

Also, this budgeting technique is very flexible. For instance, if you do not travel this month, you can save 20% of your income and utilize the same when planning a trip in another month. 

However, this budgeting technique might not work for someone with a low income, high debt or where the cost of living is high. Therefore, it becomes essential to figure out all the fixed expenses and see whether there is room for more expenditure or not before applying the 60-20-20 rule. This technique might not work for all, but it is generally fruitful for many. Therefore, to check whether this budgeting technique is for you, you should definitely try it. 

Similarly, if your income is high and spending is low, you can save much more than a mere 20% of your income. Thankfully, numerous other budgeting techniques are available to meet the requirements of different income categories. 

Making The Best Out Of 60-20-20 Rule 

To ensure that the 60-20-20 rule makes you financially independent, you need to take special care of the 20% of the income that goes into savings. 20% of the income that needs to be saved can also be invested. Through wise investment, you can ensure that you save money and grow it. Almost all budgeting techniques recommend saving 20% of the income to create a stable financial situation. You can use the 20% of income in investments like insurance plans, mutual funds, real estate and the stock market. However, ensure that you do not invest everything in one category. In terms of investment, keeping all the eggs in a different basket is always a good idea. 

To conclude, give the 60-20-20 budgeting technique a try to get started with saving and investing money. Then, as you proceed and increase your income, you can step above other advanced budgeting techniques.

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