In this article, Young Sheep will share about the 50-30-20 principle when budgeting for investments with newbies. This is a simple principle that Sheep finds very effective and easy to apply 😚.
What is the 50/30/20 rule?
The 50/30/20 rule is an easy budgeting method that helps Rams manage their money effectively and sustainably.
Simply, the monthly income (from salary/business) of the Sheep will be divided into 3 parts:
50% for basic needs (housing, living, transportation, daily meals,...)
30% for wishes (going out, taking care of parents, shopping, traveling,...)
20% to save
Depending on the needs and living standards in different locations, the Sheep can adjust between 50 and 30 but always set aside at least 20% for savings.
Suppose, Young Sheep goes to work and earns 10 million per month. As soon as there is a "ting ting" sound signaling the salary coming in 😀, Sheep must immediately transfer 2 million to the Savings section, keep it separate and out of sight.
If you do this regularly, after only 5 months or 1 year, the Sheep will have a moderate amount of money from 10 million to more than 20 million, or more due to the addition of interest from the bank. This amount of money is enough for Sheep to consider spending 30% to 50% to research an investment channel.
If you do the opposite, that is, keep spending until the end of the month and then transfer the remaining balance to Savings (or not Saving), it will be very difficult to build a large sum of money.
In short, investment money comes from the savings we set aside and don't use. Start with small things, small amounts of money.
Consistently saving at least 20% of your income each month can help you build a better, more sustainable savings plan and invest money, whether your ultimate goal is to build a rainy day fund, business or even buying a house.
Do you find the 50/30/20 rule reasonable? If you prefer a different ratio, comment below!
