How to Budget your Money: The 50 30 20 Rule of Money
Channel: Mario Alvarado
Date: 2019-11-28

Hey whats up guys this is Mario, in todays video I am going to talk about How to Budget your Money so you too can become Financially Independent. I still remember when I was in my early twenty's going out every weekend and overspending on drinks and entertainment. At that point in my life I was living paycheck to paycheck. I had no control over my money. I soon realize that if I don't change my bad habits I was going to be living at home for the rest of my life. I needed to make a change, I needed to grow up. What really helped me take control of my money was creating a monthly budget. I learned how to use the 50 30 20 Rule of Money. This budgeting tool really helped me keep track of all my expenses, income, and even savings. So in this video guys I am going to talk about the 50 30 20 Rule of Money, and how this budgeting tool can help you take control of your money so you too can become Financially Independent. 

The 50 30 20 rule of money is a budgeting tool that states that 50 percent of your income should go to your needs, 30 percent of your income to your wants, and 20 percent of your income to your savings and investments.

When it comes to your needs it is very important to not confuse them with your wants. Needs should only include things that are important to your survival like housing and food. Needs should also include insurance that protects your most important assets, which includes your health, home, and car. We live in the 21st century, and because communication is so important for survival in this era, I include having a phone and internet as a need. 

When it comes to wants it is important to not overspend on vacations, which happen to be the most expensive want out of all them. Going out with your friends to restaurants and bars is okay as long as you do not go over your 30 percent budget. Remember guys buying drinks at bars is very expensive, you can always buy drinks at your local grocery store. Entertainment can also get easily out of hand, especially when you buy expensive concert tickets, so just remember to keep it on budget. It is easy to overspend on brands like Nike, Gucci, Apple, Adidas, and Calvin Klein. It is okay to spend money on brands as long as it stays within 30 percent of your monthly budget. 

Moving on to Savings and Investments. The reason why savings and investments are so important is because you don't want to work for the next 10, 20, or 30 years without having nothing to show for it. You need to save so you can invest in yourself and invest in your future. 20 percent of your income should go to savings and investments. Half of that income, which is 10 percent of your income should go to investments. Either a 401K that your employers offers, or an IRA that you have opened on your own if you are self employed or work part time and your employer does not offer a 401K plan. The second half of the 20 percent of income should be invested in paying down high interest lines of credit, like credit cards with balances that charge a 20 percent annual rate. The second half of the 20 percent of income should also be used to save money for an emergency fund that covers six months of expenses that are needs. 

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