Bankruptcy Attorney | The 50/30/20 Rule

Bankruptcy Attorney . One of the biggest challenges you’ll face when you decide to start managing your money is learning how to write a budget. You know that you need to keep better track of your spending and make better financial choices. Writing a budget is part of that, but you have no idea where to start! The 50/30/20 rule for budgeting is an ideal starting place. It gives you a financial blueprint for managing your income and developing a strategy that will help you not only handle your current expenses, but also plan for the future. Also know that most Bankruptcy Attorneys offer credit counseling services that help guide you in your budgeting process.

50 Percent: Living Expenses

As a rule, no more than half of the income that you bring home each month should be dedicated to regular living expenses. This includes your house payment, your groceries, and all of your regular bills. If your bills are starting to creep over this point–or worse, have totally blasted past it–then it’s time to take a hard look at your budget to see if there are places where you can cut a little spending. In what areas of your life can you downsize? Find ways to significantly decrease your electric bill, even if it’s turning the thermostat down a couple of degrees in the winter.

Dropping your living expenses to 50% of your overall budget isn’t just a strategy to limit your regular spending. It’s also a strategy that will give you a substantial amount of financial peace. If you have a budget emergency, you’re more likely to be able to pay your regular bills if less than half of your income goes toward them.

20 Percent: Financial Management

Twenty percent of your income sounds like a big number, especially if you’re used to having that income to spend as you like. Learning to set aside that money for financial management, however, will go a long way toward helping you live the lifestyle you want in the future. The first part of financial management is paying down your debt: paying off credit cards, paying off your car, and even paying down the mortgage on your house as fast as possible. The next part is financial planning: saving for retirement, investing in methods that will help grow your income, and setting aside money for emergency savings. You can also use this money to save for life expenses: an upcoming wedding, college classes for you or your kids, and other important “big spending” necessities; however, take care to make sure that those items are necessary expenses, not just “fun money” that you’re taking out of the savings account.

30 Percent: Lifestyle Choices (aka Fun Money)

What’s left of your income after you take care of those important bills and manage your financial future is yours to spend essentially as you like. Here’s the hard part: this percentage also accounts for a number of things that you would rather tuck into the “living expenses” category. For example, it might include:

  • Eating out at restaurants, especially on a regular basis
  • Vacations
  • Your cell phone bill, especially if you’re using a smart phone and paying for a data plan
  • Your cable bill
  • An expensive car that you don’t really need

One of the most important things to recognize about the 50/20/30 plan is its dedication to keeping your “fun” expenses low–especially the recurring ones. You can choose to be flexible about your spending. If your living expenses take up less than 50% of your income, you can shift that money to other places–ideally to savings and financial planning. On the other hand, allowing that living expense category to bleed over means that it comes out of your fun money. With time, you’ll learn to moderate expenses and only make purchases that are within your means.  And if you need further guidance in the process, a Bankruptcy Attorney can offer credit counseling services that help guide you in your budgeting process.

Call bankruptcy attorney David Pinkston, bankruptcy lawyer, for a free consultation today: (904) 389-5880. If you are thinking about #bankruptcy, #chapter13bankruptcy or #foreclosure in the Jacksonville, Florida area, you should call attorney David Pinkston. David is very experienced with all aspects of bankruptcy law yet very personable and easy to talk to. Call Us Today! (904) 389-5880