 TITLE: How to Budget Using the 50\/30\/20 Rule CONTENT: The initial step when using any budgeting strategy is to understand how much you're earning. Take a look at your paychecks and bank account statements for the past three months and identify your average amount of after-tax income per month.\nNext, you'll allocate that money in the following way:\n*   **Necessities: 50% of income.** Ideally, you'll spend a maximum of half your monthly income on essential expenses like rent or mortgage payments, groceries, utility bills and minimum debt payments to keep your accounts in good standing.\n*   **Discretionary items: 30% or less of income.** If the prior category is \"needs,\" this is \"wants.\" Perhaps you have a Netflix subscription, you go to concerts often or you like to travel. These expenses enrich your life, but they're not strictly necessary. Aim to spend, at most, 30% of your income on discretionary items and experiences.\n*   **Savings and debt payments: 20% or more of income.** This category includes savings for retirement, emergencies and specific medium-term goals, such as buying a home. It also includes debt payments beyond your minimum monthly bill. If you need to contribute more than 20% of your income to savings and debt, it's best to pull from the discretionary spending category.\nTo figure out how much to save for each goal, some rules of thumb may help. Experts recommend saving 10% to 15% of your pretax income for retirement, for instance—and at least saving up to any employer match your company 401(k) plan provides. For emergencies, experts also suggest keeping three to six months' worth of expenses in a savings account you can easily access. It's OK if you can only set aside $25 or $50 per month for emergencies to start, as long as you save regularly. END