By Robyn Dutton
Moolah, dough, dinero, cash… money. Whatever you want to call it, it’s a good thing to have in the bank. Millennials are in a unique stage in their lives where they have plenty of time to both earn and save, so it’s important to form good habits for the future. It’s hard to establish guidelines for how and where to spend your money, so following the rule of 50/20/30 allows for a reasonable and positive structure. It also saves you from throwing around money like a rapper in a strip club… you’re welcome. So, without further ado, here are the guidelines:
50 percent (or less) of your paycheck should be spent on: essentials. You know, things like shelter, food, transportation, utilities and all other necessities. No, that new top at the mall you “need” doesn’t count. These are reasonable basics for survival in your current stage of life, which you absolutely could not do without. Rent or mortgage payments shouldn’t exceed 35 percent of this number and the other categories should fill in the rest. As with everything, this varies per person. You may pay higher rent to live downtown in a big city, but you walk everywhere, and thus, save on transportation costs. Whatever way you work it, just make sure you are coming in under the half a dollar mark.
20 percent (or more) of your paycheck should be spent on: savings. This one doesn’t need much explaining, however, it’s unfortunately one of the most overlooked areas for millennials. Why? It doesn’t heed our need for immediate gratification. So, let’s have the numbers do the talking. According to U.S. News, if you start saving at age 25 and put away $4,830 annually, you will reach $1 million by age 65. Palm Springs here you come!
30 percent (or less) of your paycheck should be spent on: personal expenditures. After all your essentials and savings have been allocated, you can now think about your personal desires. These are optional expenses and are the largest variable that dictates what your savings account will look like and what your lifestyle will look like. Personal expenditures can include entertainment, gym memberships, hobbies, travel, shopping and dining. Dining surprised you there, didn’t it? It’s a personal expense because it varies month to month and person to person. One week you could be sipping mimosas and trying a new fancy restaurant and the next week you could be making home cooked meals of veggies and cheap staples without even so much as looking at the takeout menu. The trick in this area is to know yourself and know what’s important to you to establish a balance between living a rewarding life as well as a responsible one.
I understand it’s tough to manage so many payments, but I’d recommend getting familiar with your statements. Many online bank portals will categorize your bank and credit card payments so you can easily navigate where your funds are being allocated with just a click. Graphs, charts and reports are your new best friends. It’s also recommended that you download a budget spreadsheet for your own use to input your personal figures to match your goals. I’m hopeful these steps will put you on the path to success and get you some more of that sweet money, money, monaaaay.
If all else fails just marry rich, right?
Wrong. Go work on that budget.