What is the 75/15/10 rule? Heres how to pick the right budgeting method for you
Budgeting is one of the most common ways to manage your money — or lack of it — but how do you know which method is the right one for you?“As with any budget, how you allocate your income depends on your personal financial situation.The key is to create a budget you’ll actually stick to over time,” Courtney Alev, consumer financial advocate at Credit Karma, told The Post.
“One of the best ways to combat financial stress is to take action, even if the first steps seem small.” The 75/15/10 rule directs people to divide their paychecks by putting 75% toward your needs, such as everyday expenses, then allocating 15% to long-term investing and 10% to short-term savings.This budget allows for more spending than other popular plans and focuses on building wealth, but it doesn’t give much wiggle room for unexpected expenses or paying off large debts.According to Alev, “The first step is to set clear financial goals by asking yourself what you’re hoping to do with your money in the short and long term.” Are you planning to buy a brownstone? Pay off your student loans? Go to Greece this summer?You have decisions to make — and bucks to bank.In the past, experts have touted other percentage-based budgets, including the 50/30/20 and 60/30/10 plans.
They may seem similar, but those formulas are surprisingly different.The two systems focus less on building wealth and more on getting you your little sweet treat or on the next flight to your dream destination.The 50/30/20 method guides people to allocate 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment.However, as many people struggled to maintain their “needs” by taking only half of their income, the plan was updated to 60/30/10 — 60% of your monthly take-home income for needs, 30% for wants and 10% shifted to savings.“Over the last couple of years, we have seen pretty substantial inflation across most main spending categories.Housing prices, rent, interest rates and...