In business and in investing, your time is always the most valuable resource at your disposal. It’s never too early (or late!) to break old financial habits and build better ones. You have the power to get the most out of your present while still preparing for what’s to come. With a few easy steps, you’re quickly on the way to staying on top of your finances and to investing in your future.
With just a simple equation, you can start to prepare proactively for the future and still take care of the day-to-day. The 20-30-50 plan can help you stabilize your daily finances and fund your investment account.
Here’s the breakdown:
- 50% of your take-home pay goes to necessary expenses like rent, bills, and other expenditures. These are the absolute necessities – not the fun stuff.
- 30% is spendable income. Here’s where you get the funds for fun! Spend this portion at your discretion.
- At least 20% is used to pay your future self by investing. This is a must! Paying yourself is just as important as paying any other bill.
No one wants to focus on coupon-clipping, and that kind of budget won’t make you wealthy. Instead, a clear system for dividing each paycheck lets you grow your wealth and manage expenses without worrying about budgeting on a daily basis.