How To Manage Your Money – Tips To Save Money

Money Saving Tips You Must Follow

I’m gonna

share something called the 50 30 20 rule

of money this is a very important

concept to understand especially if

you’ve ever found yourself in a position

where you want to save more money or you

want to invest more money but you’re

just not really sure where that’s going

to come out of your budget how you’re

going to be able to start doing this

more putting in 20 30 40 percent of your

income and finding a way to start saving

investing more so that potentially you

can retire earlier you can afford to pay

for your kids college you can afford to

buy a new home in the future so there’s

a lot of reasons why we’d want to save

and invest money but let’s talk about

this rule of money very important

understand and I think a lot of people

are going to find some value in this and

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pushed out to more people and let’s just

get started with this so the 50 30 20

roll of money it’s been around for quite

some time and for the most part it’s a

really really helpful idea and tool that

you can use in order to build wealth now

there are some critiques that I’m going

to leaving here throughout this video

towards the end I’m going to talk about

some downsides to it and some things

that you want to just be very careful of

if you’re going to follow this strategy

but overall it’s definitely something

that in most cases is going to put you

in a much better financial position than

you would be otherwise if you weren’t

using this so the first thing we need to

do in order to use this rule of money is

we need to calculate our post tax income

so to do this simply just look at your

pay stub look at how much money is

coming into your bank account after

taxes so you’re probably going to be

getting taxed before so your employer is

going to be withholding a certain amount

of money for taxes and you put that

aside and then you get a certain amount

of money in your bank account so if

you’re making forty-five thousand

dollars per year you might only see

thirty five thousand dollars per year

actually coming in to your bank account

thanks to Uncle Sam and the government

for taxing us right so what you’re gonna

do then is add back any non tax

deduction so health care or if you’ve

been making deductions for 401ks or IRAs

or some other type of retirement

accounts then add that back into this

equation just to give us this example

number that we’re going to talk about

how we can use this fifty thirty twenty

rule and then finally you want to be you

want to make sure that you are running a

budget really at all times so I have a

free budget template down in description

below there’s no catch it’s just a free

Excel template that I may

it’s pretty simple to use but it’s going

to help you track where your money’s

coming in and where it’s going out so

that you’re able to really see where you

stand financially once you do these

three things that’s when we can actually

start talking about the 50 30 20 will of

money so the first thing that we need to

understand here is that this 50 stands

for 50% of your money goes towards your

needs now this is a guideline this isn’t

to say that this is exactly what you

should be at at the moment but more so

something that you should be shooting

for and hoping to get your needs down to

about 50% of your income now the truth

is if you’re making $7.25 an hour it

might be very difficult to get your

needs down to 50% of your after-tax

income so if you’re making fifteen

twenty thirty dollars an hour it might

be a little bit more possible to do this

depending on where you’re living at the

moment but the idea here is that 50

percent of your income is going towards

needs now I want to very much clarify

what we mean when we say Mead so we’re

talking about putting a roof over your

head we’re not talking about the best

school district in the county we’re not

talking about a really nice condo

somewhere we’re talking about something

that gets a roof over your head that

counts as a need okay the next one food

look some people spend a lot of money on

food we’re not talking about restaurants

this is under the needs category so this

is food such as groceries that are very

important to survive we obviously all

need food we need shelter to survive

right so these two are very important

health care this is something regardless

of your income you should not be

skimping on because the truth is if we

don’t have good health we’re probably

act me around for a very long time so

take good care of yourself this

absolutely goes in the needs category

utilities not getting your power shutoff

not getting your water shut-off not

getting evicted from your home so these

are all very important things that are

needs and then also we throw in here

minimum debt payments as a need as well

so when we say this look the problem

with this is that you could have maybe

bought a TV with your credit card but

you have them in one payment on this

well the TV is not a need but I need is

to pay off that minimum payment on the

credit card at the very least so we do

throw that into the needs category for

this and it is something that’s very

important going along with this for the

minimum debt payments is if you have

student loans if you have a

all these things that are going to

affect your credit score if you don’t

pay them

you essentially default on the loan

that’s very very bad news you don’t want

to find yourself in that position so

we’re throwing that under needs as well

for minimum payments so those things

right here are going to be classified as

needs try your best to get these down

and look we have videos on all of these

topics we have videos I just made a

video about how you can save money on

groceries we’re coming out with a new

one on how I spend between forty to

fifty dollars per week on groceries at

the most so if you’re interested in

those make sure you are subscribed the

channel with the bail notification icon

so you don’t miss those videos but we’ve

talked about how to save money with

housing we’ve talked about how to save

money with these other things as well as

well as transportation we’ll talk about

that in the future whether that’s a need

versus a want depends on your situation

but let’s keep moving on here all right

so now according to the fifty thirty

twenty rule thirty percent of your

income should be going towards your

wants there is a very large difference

between needs and wants and hopefully

we’re clarifying that in this video but

as far as wants go look clothing I would

classify this for the most part as a

want now obviously you shouldn’t be

running around downtown completely nude

just and running through the street

you’re probably gonna get arrested right

you don’t want to do that but the truth

is clothing it doesn’t have to cost a

lot of money if you weren’t in a

financial pinch you can go to 50 Cent’s

Sunday at Goodwill or Salvation Army and

get some clothing for fifty cents for a

couple of dollars you get some clothes

so for the most part clothing I would

classify it as a want there is a very

small need for clothing you could budget

some of that infinity to maybe twenty

dollars a month for the essentials for

clothing but the truth is you can get

that down very very low and for the most

part clothing it’s going to be a want in

a lot of cases now phones as well this

is something that is not necessary to

keep you alive it’s not necessary to

keep you off the streets

so therefore phones and phone bills

these are classified as a one even

though this might be something that’s

pretty important in life you really

everybody has a phone and in some cases

you can’t even really function without

your phone you go to some places and

they say well we only accept phones for

this or you can only use the app and

eventually you think about phones in the

future we don’t want to go off on a

tangent here but you think about phones

in the future I mean you might not even

be able to call a taxi if you don’t have

a phone and it’s all Ebers you have to

have an uber app if you don’t have your

phone what are you

it’s a weird situation but anyway let’s

talk about the next year restaurants ok

if you’re gonna have to eat this is a

one this is an obvious want it’s not

groceries it’s not paying for bread and

rice and beans and potatoes and and

vegetables and fruits but it’s it’s

things that you’re paying the chef to

make you food so this is money that is

classified as a want as well as

entertainment and vacations now it’s not

to say that you should not be spending

money on these like 30% of your income

can go to these under this specific rule

the 50 30 20 rule but you don’t want to

end up like this guy over here where

you’re just doing absolutely nothing I

don’t even know why I drew him on there

but essentially he’s pretty bored he’s

got nothing going on and he’s saving all

of his money and not doing any of these

and that kind of sucks

okay so put about thirty percent towards

your wants and you can change this a

little bit you can tweak it we’re going

to talk about that in the next coming

minutes here but find things really this

can add up a lot this really can because

you think about all these small things

that you don’t absolutely need maybe you

want to furnish your apartment you got a

new apartment right I just moved in and

there’s a lot of things that you realize

if you want a bed frame that could be

100 some dollars would be $200 you want

a new mattress you want some furniture

you want to get a couch you want to get

certain types of things for your kitchen

you want to get a really nice blender

these things add up quite a bit and your

wants you’re gonna find that they’re

filled very quickly but do an audit on

yourself track your budget and see how

much is going towards your wants right

now versus how much is going towards

your needs and then let’s talk about the

final one here which is going to be 20%

going towards savings and investments

now the trip says I really like to flip

these around so for myself I find myself

saving way more than 20% of my income

and investing way more than 20% of my

income but this is a good rule of thumb

and you know for people who if you find

yourself making say $30,000 per year

then you would split this down into a

very simple thing so for 50% of your

money if you’re making $30,000 per year

after taxes you would say that $15,000

of that money and goes towards your

needs over the course of the year

remember the definition of needs 30% of

that $30,000

goes towards your wants so $9,000 and

then savings and investments including

your IRA your 401k you’ll retire

accounts all these things are included

under savings and investments but if you

can get to at least 20% I would argue

that you would likely be in a much

better financial position than most

people today the truth is most

Millennials are not anywhere near this

percentage here and even if you’re just

sucking money into your 401k or maxing

that out you’re probably not always but

truth is you’re probably going to be in

a much better financial position

obviously we can’t predict exactly

what’s going to happen in the stock

market or in the markets in general but

for the most part they do go up now a

debt repayment we can put this into the

savings and investments because really

when you look at whether you should pay

off debt or invest I’d like to think of

both of these really as something that

is beneficial for your finances overall

so we can put it in this and then the

emergency fund as well we talked about

this why it’s important to have at least

close to six months worth of emergency

fund that you can live off of if you get

laid off from your job if something

happens if you have to pay some very

expensive medical bills these are all

incredibly important so that is the 50

30 20 rule personally what I would try

to do is if you’re making over $50,000

per year after taxes and you’re not

living in an expensive city like New

York or San Francisco so if you’re

making over $50,000 per year after tax I

would try to really switch these numbers

around and go the 50 20 30 rule rather

than the 50 30 20 rule so take 20% for

your wants and 30% for your savings and

investments and just this little tweak

can quite literally shave off years off

of your projected retirement dates so

that instead of retiring at age 63 like

the average American you might be able

to retire at age 55 maybe even age 50 or

earlier in some cases depending on how

much you can get this up but just

remember overall look you do want to

spend some money on your wants go on

vacation sometimes make sure that you’re

budgeting for that make sure that you

are buying things that you do enjoy if

you love playing music go buy a guitar

okay don’t deprive yourself of some of

these things but make sure you have this

very well laid out so hopefully you

found some value in this.

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