What Is 80-20 Budget Rule?

The 80-20 budget rule : allocating 80% of your income to prioritize essential expenses and savings, while using the result from 20% for discretionary spending and personal goals.

Have you ever felt like your finances are a wild horse that you can’t seem to tame? The constant stress of bills, debts, and expenses can make it hard to enjoy life and achieve your financial goals. But what if there was a way to rein in your personal finances and take control of your money? Enter the 80-20 budget.


The 80-20 budget is a simple yet powerful method that can help you master your personal finances and achieve financial freedom. By allocating 80% of your income to your needs and wants and putting the remaining 20% directly towards your savings, you can create a budget plan that works for you.


In this article, we will provide you with a comprehensive guide to creating an 80-20 budget and explain the benefits of this method. So, saddle up and let’s take a go towards financial success!

Key Takeaways


  • The 80-20 budgeting method is a simple yet powerful budgeting method to get you on track.

  • The 80-20 budget is only two categories: 80% to needs/wants and 20% to savings.

  • The 80-20 budget is great for paying yourself first and can hold you accountable to a budget without taking up a bunch of time.

  • The 80-20 plan is a great starting point for those that don’t like to meticulously track expenses and can set you up for financial success.

What Is The 80-20 Budget Rule?


What is the 80-20 Rule ?

Let’s learn about what the 80-20 budget rule is and how to manage your personal finances with this rule. It’s a simple yet powerful budgeting method that states that 80 percent of our income goes to needs/wants and the savings come from 20 percent. The 80-20 budget is also known as the Pareto Principle, which is a theory stating that 80% of results come from 20% of the effort or input.


This budget is a simplified version of the popular 50-30-20 budget rule, which breaks down into three categories: 50% to needs, 30% to wants, and 20% to savings. The 80-20 budget is a great starting point for those who want to master their finances without spending too much time tracking expenses.


It’s a straightforward formula to follow, and it helps you create a habit of budgeting. With this budget, you pay yourself first, which means you allot 20% of your income to increase your savings before spending anything else. This budgeting method is perfect for those who face budgeting challenges or want to automate their savings.

How To Create An 80-20 Budget


How To Create An 80-20 Budget

We can easily break down our spending and saving habits into two simple categories using the 80-20 budgeting method. To create an 80-20 budget, follow these easy steps:


  • Calculate your monthly income: Before you start allocating your income, you need to know how much money you have coming in each month. This includes your salary, bonuses, and any other sources of income you may have.

  • Allocate 80% of your income to needs and wants: The first step in creating an 80-20 budget money is to allocate 80% of your income to your needs and wants. This includes your rent/mortgage payments, utilities, groceries, transportation, and entertainment.

  • Allocate 20% of your income to savings: The second step is to allocate 20 percent of your income to savings. This includes your emergency fund, retirement savings, and any other long-term savings goals you may have.

  • Tips for sticking to your 80-20 budget: To ensure you stick to your 80-20 budget, try automating your savings, easier to tracking your spending, and reviewing your budget regularly. Additionally, avoid overspending on wants and be mindful of your needs to ensure you aren’t overspending in this category.

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