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50-20-30 plan: How to set a budget and stick with it

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If you’re looking to save money and fix your finances, a budget is an easy way to reach your goals, says Lisa Rowan, a savings expert at The Penny Hoarder.

“Setting a budget is really important. And don’t think of it as something that’s going to limit you—think of it as something that’s going to set you up to meet your financial goals,” Rowan says.

The 50-20-30 budget plan is an easy way to allocate your expenses into categories. Fifty percent of your budget should go to essentials, like rent, utilities, groceries, car payments, insurance, and other things you need to pay each month.

Twenty percent should be set aside for your financial goals, like a savings or retirement account, or an emergency fund.

The final 30% is for discretionary spending, like dinners out or vacations.

Rowan says your budget doesn’t have to be set in stone.

“A budget is something you can look at every month and make adjustments, or even every day if you just need a reminder of what your goals are and what you’re working towards,” she says.

And if you happen to overspend in a certain category, your budget isn’t ruined, Rowan says. “The budget is malleable, and is something you can change to meet your needs,” she says. “If you mess up once, you can just get back to it and start again.”