We Tell How To Manage Your Finances With The 50/20/30 Formulation

Photo illustration (Yudhistira Mahabharata / VOI)

JAKARTA - Managing finances is tricky. Not everyone is good at managing it. Especially about expenses. However, it turns out that there is a simple way so that the money we have earned doesn't run out in vain. Namely by applying the 50/20/30 rule. What is that? How to?

As explained by doughroller.net, the 50/20/30 rule means that 50 percent of income is allocated for necessities, such as transportation costs, food, groceries, and clothing.

Then 20 percent is for financial purposes, for example the most basic, namely saving or paying off debts that you may have.

Then another 30 percent, the expenditure budget is to fulfill a lifestyle. Such as vacations, entertainment, the gym, fulfilling hobbies, the need to replace devices if necessary, and other lifestyle needs.

The 50/20/30 rule model was first popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in a book they wrote entitled All Your Worth.

Indeed, the strategy does not explain what income standards are in order to implement it, but experts say this is the basic rule for beginners.

Meanwhile Warren and Tyagi called it a "balanced financial formula." While they explain that although there are times when we might break the rule (for example when income drops, or there is a sudden need, it will keep your finances generally healthy.