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When it comes to managing your personal finances, the 50/30/20 budgeting rule is one such simple, yet powerful strategy to help you gain financial stability – and save for the long-term. At its core, the rule is a method for managing your income in a way that balances your immediate needs and wants with future financial aspirations. Whether you’re aiming to save for a house down payment, build an emergency fund, or invest for your retirement in the long-term, the 50/30/20 rule offers a clear path forward. The foundation of the 50-30-20 rule is built on the principle that your income must consistently exceed or at least equal your expenses. Simply put: Income ≥ Expenses = Financial Stability However, it’s all too common to hear of people living beyond their means — sometimes even high-earners may find themselves in this trap. When you ensure that your expenses are below your income, you create a surplus that can help to boost your savings. To balance your immediate needs, you may be tempted to sacrifice your long-term savings. However, we must realise that most of us only have a 40-year career (between 25 to 65) to save up for 60 years of expenses (plus retirement from 65 to 85). We cannot neglect the savings pot. The 50/30/20 rule suggests dividing your income into three categories: We can use an example to illustrate a practical use of the 50/30/20 rule. Suppose John’s take-home pay is $5,000 per month, his budget would look like this: To make the 50-30-20 rule work for you, simply follow these 4 steps: To safeguard your savings bucket, consider transferring the 20% savings to a or sub-account. This can help you resist the temptation to dip into your savings for your wants or unnecessary purchases. Of course, you also need to grow your savings pot. At the very least, you should be earning decent interest rates on your savings via a high-interest-rate savings account, especially on your emergency savings fund. Alternatively, you may also invest your savings earmarked for the long-term to earn more attractive returns over the long investment horizon you have. Life happens. What’s more important to remember that the 50/30/20 rule should serve as a guide, and not a constraint on your financial situation. Don’t feel bad if you cannot always stick to these ratios. You can adjust to better suit your current financial situation and goals, while striving to do better over time. For example, if you have more dependents such as a big family or elderly parents and parents-in-law, you may need to allocate more towards the bucket. You can have a plan to earn more or reduce your in the interim to balance out your budget. Similarly, higher-income earners with fewer dependents may be able to save and invest much more aggressively, setting themselves up for greater financial growth over time. Play around with the formula and create a sweet spot for yourself. But remember: the crux is always prioritise living below your means no matter what. A crucial aspect of the 50/30/20 rule is having the discipline over a long period to achieve financial success. You can have the best budget on paper, but without consistency and self-control, you will likely struggle to achieve your financial goals. Here are some simple tips for sticking to your budget: The 50/30/20 rule offers a clear and actionable framework for aligning your spending with your income, enabling you to build your savings over time. It’s a simple and powerful tool for anyone seeking to take control of their finances and achieve long-term financial success. Give it a try and watch as your financial life transforms. Always remember, this rule – like most personal financial rules – is meant to serve you rather than choke you. Adjust to your personal financial situation, and strive to do better. Credit your salary to get S$300, then spend with us to enjoy additional S$200. . T&Cs apply. SGD Deposits are insured up to S$100K by SDIC.