How To Manage Your Money (50/30/20 Rule)

welcome back to whiteboard finance my name is marco and i'm here to help you master your money and build your wealth today we're talking about how to manage your money using the 50 30 20 rule but before we get into the video i just want to show you very quickly a screenshot here of a poll that i ran about two weeks ago so we have a lot of new subscribers to this channel which is great and about 834 of you voted on this poll which is awesome so basically that poll is just asking what kind of videos you want to see from this channel and 30 percent of you said personal finance related 22 percent said stock market 18 percent said cars 17 percent want to learn more about real estate investing and 13 percent said how to make money online but the encouraging thing is is that most of these comments from this poll were people saying they wanted to learn about all these things so thank you so much to those who did vote and contribute and that's why i want to talk about personal finance in this video today so you may be wondering what the 50 30 20 rule is so as always let's write this down so we can get a visual representation of what this means so pretend that we have a pie right here and half of this pie which is the 50 percent actually stands for your needs so again this is all about budgeting and understanding where your money is going and i in an ideal personal budget portfolio so 50 are needs let's call this 30 percent are going to wants and then 20 is going to savings or paying off debt so now that you have a visual representation let's break down each one of these numbers and give you examples of each so that you can be gauging your own personal finance based on these metrics keep in mind we're working with after tax dollars which is called net income so you may have a gross pay of let's say 50 grand a year but after taxes you're only dealing with another specific number we're using that after tax dollar number so in terms of the 50 percent needs what are some things that can be included in this so let's think about regular living expenses so we have groceries we have housing whether you have a mortgage or rent uh you have insurance for health uh heaven forbid something happened to you i would consider health insurance definitely a need you can have utilities so electricity things like that etc etc so the the way i define a need is that it's basically something that would greatly inconvenience you or something that you literally cannot live without so food shelter things like that so when you budget 50 percent towards your needs remember that those are what you're looking at so the next logical area to go into is going to be what is really considered a want and i think this is where most americans run into the difference between wants and needs okay so a want is something that causes a minor inconvenience in your life okay it's not necessarily a need to where hey if i don't eat or if i don't have shelter i may die right a want is something where it's like hey you know am i willing to give a minor inconvenience like dropping netflix or not having hulu or not buying a brand new grill to grow a steak on you know those are needs okay so some of the things that would fall under this category would be things like shopping do you absolutely need to shop for brand new clothes right this second are you gonna drop dead if you don't get a new pair of shoes maybe my wife will but i know that i can survive um you know dining out i think this is a big one for americans a lot of people for whatever reason their lifestyles are so busy that you know it's easier just to jump in the car and go grab something to eat rather than preparing the food yourself hobbies so i think that everyone should definitely have a hobby that's one of the greatest joys of life whether it's gardening you know you fly drones you're a video editor whatever you want to do whatever keeps you happy as a hobby this definitely falls under a want because it's not necessary to live so again guys a want is something that you don't necessarily need but it improves the quality of your life greatly so let's go to the last 20 and i know a lot of this sounds basic but until you actually write this down and understand where all your money is going to it's like your wants can easily creep into that needs category to where they're both overflowing and you're in debt every month so speaking of debt let's talk about savings okay so savings and paying off debt this is where the last 20 of your income should go to and again these are all net numbers so if you have let's call let's say for example an emergency fund okay this i would consider savings what i like to do for emergency funds this is 6 to 12 months of living expenses so if you know that your needs category and a little bit of wants comes out to be let's say 2 000 a month for your entire family you know that you need to save about 12 to 24 000 in your emergency fund i know that sounds like a lot of money but you know one or two layoffs in a family of you know one or two income earners that can really save your butt right there you guys obviously you know paying off debts so if you have credit cards you know student loans things like that these are debts that you should just smash using that 20 and i will make another video about how to actually pay off debt using the debt avalanche and the debt snowball method okay and then obviously if you want to save for retirement in my opinion this is one of the things that most americans will be suffering from 20 30 years from now because a lot of them are just not focusing on retirement savings so i know a lot of this stuff sounds like common sense you guys but until you actually create a monthly budget knowing what your monthly net income is breaking it down by 50 30 and 20 percent you would be surprised at where different dollars go for different categories so unless um unless it's not a want or a need i would definitely put it under this 20 savings in debt category so that's pretty much all i have for you guys today i know that this may not be some earth shattering information but again until you actually write it down and understand where every single one of your after tax dollars is going you might be surprised so i know this video is a little bit on the shorter side but again it's very important information so if you have a friend or family member who would benefit from it please share it with them i implore you a lot of people are getting a lot of benefit from these videos and i don't ask for anything in return just that you share it thank you so much everybody and have a prosperous day [Music] you

Channel: Marko - WhiteBoard Finance

Views: 3,270,990

Keywords: how to manage your money, how to manage money, 50/30/20 rule, how to budget, 50/30/20 budget, how to budget money

Id: HQzoZfc3GwQ

Length: 7min 8sec (428 seconds)

Published: Mon May 13 2019