What would improve in your life if you learned how to manage your money better? Learning how to divide your income wisely when it’s deposited into your bank account can go a long way in improving your financial future. Financial allocation strategies like the 50/30/20 rule will help sharpen your money prioritization skills and give you a goal to strive toward each month. By dividing your paycheck based on the steps below, you can use your money more purposefully. 

How to Divide Your Paycheck Using the 50/30/20 Rule

1. Devote 50% to Necessities 

Making time to set financial goals will help clarify what’s necessary and what’s optional in your life. Without specific and measurable goals, the money you’ve worked hard for can gradually or instantaneously disappear from your bank account even if you have a decent income. According to the 50/30/20 rule, 50% of your income should be devoted to necessities. These are items that you can’t live without, including rent or mortgage, utilities, groceries, and medication. For instance, if you’re making $5,000 per month, you’ll know that $2,500 should go to necessities.

2. Dedicate 30% to Wants

There’s no shame in rewarding yourself every once in a while. This may involve using some of your money to have fun. However, some people struggle to keep track of the money in their bank account and might overspend. To avoid this, dedicate 30% of your paycheck to wants. With an income of $5,000 per month, a person can spend $1,500 on fun activities such as dining, shopping, or eating out. While you might not use all the money allocated to this sector, having a certain amount set aside for leisurely activities can teach you to maintain a budget.

3. Set Aside 20% for Savings

Whether you’re saving money for emergencies, retirement, a rainy day fund, or a new car, make a deliberate effort to set aside funds for the future. If you’re following the 50/30/20 rule, 20% of your paycheck should go into a savings account. That is, if you earn $5,000 per month, you should save $1,000. If 20% is more than you can afford, start at 10% or even 5% and work your way up. Saving is a crucial skill to make sure you’re accumulating money for your own financial security in the future.

Managing your money can be difficult, so rely on Citizens Bank in Byhalia, MS, to guide you every step of the way. Established in 1919 and a member of the FDIC, they offer personal banking, online banking, secured and unsecured consumer loans, and mortgages to the Marshall County community. They believe in quick decisions and personalized customer service to help every customer have a secure financial future. Give them a call today at (662) 838-2146 or visit their website for more information on their services.