You may have come across somebody who rose from grass to grace. Do you also have difficulties in managing your expenditures and savings? If yes, this article is your ultimate life hack!
Well, in 2005 two Americans Warren and Tyagi came up with a rule named 50/30/20 that helps people manage their finances.
Information on The Balance states that the first step is calculating your after-tax income. If you are self-employed this value is attained by your gross income less the expenses involved.
50% of your after-tax income should be spent on your needs. These are expenditures that you cannot forego; including your rent, health insurance, school fees and of course food.
You have things that you spend on that you can actually forego. These are called 'wants' and includes expenditures on dates, trendy fashion clothes, Netflix and electronics.
Wants should take 30% of your after-tax income.
Finally, you're left with 20%. This amount should go towards savings, investments and paying debts. That this proportion can be used for emergency funds. Moreover for better savings, one can spare some money for wants to be used for sacings.
A quick example, if your after-tax income is Ksh 40,000, use 20,000 (50%) on your needs and 12000 on wants. The remaining 8000 should be spent on your chama savings and don't forget your loans too.