New year, new projects !
If one of the 2023 goals was to save, an American way might just make it easier for you.
The rule is to divide your budget into three categories to manage to put money aside at the end of the month.
It was popularized by US Senator Elizabeth Warren in the book
All Your Worth: The Ultimate Lifetime Money Plan
,
published
in 2005, as reported in a
Forbes
article in March 2022.
Needs vs non-essential expenses
According to the rule, 50% of our budget will have to be spent on “needs”, that is, rent, food, means of transport, medical expenses and costs for possible children.
20% of monthly income will be saved for specific objectives, such as the repayment of a loan or a real estate purchase.
The remaining 30% of the budget can be spent as you wish, for the sole purpose of having fun.
"This last category refers to non-essential costs that could be dispensed with," says the
Forbes
article .
A drink with friends, new clothes or a subscription to various streaming sites, for example.
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This method is “a good way to get used to making saving and paying off debt a consistent part of your budget,” the
Forbes
article states .
But the rule can be difficult to follow for people with low incomes or living in a city where the cost of living is high, ”qualifies the journalist.
Elizabeth Warren's tip can, however, be used to identify excessive non-essential expenses and guide any adjustments to be made.
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