The Financial Planning Rules You Should Apply

Financial planning is used to determine the direction of personal finance goals you want to achieve. You certainly want your future to be financially stable and have wealth assets that support your life like your home, car, or your parents’ needs. So financial planning is very important to do, not just control the expenses you do, but you can also predict your financial condition in the future. To do a good financial plan, you can apply a rule called “Rule 50/20/30”. What does the rule mean? Consider the following explanation:

1. Rule 50

This means that 50 percent of your income each month should be allocated for important expenses to keep you alive in the middle of the month. The important monthly and routine expenditures are for the house, transportation, foodstuffs and other necessities such as soap and cleaning products to cosmetics. In addition, other important expenditures are the payment of utility bills and water. Specific allocations for spending are important to keep you safe and your basic needs met. Of course, for this type of expenditure you have to adjust the amount of your income, if it is bigger than the pole, you will not be able to allocate your money for other needs. For example for the needs of leisure and entertainment or even saving. So be wise to allocate 50 percent of your income for this purpose yes.

2. Rule 20

This rule requires you to pay your financial obligations such as paying car/motorcycle payments, paying credit card debt, paying health insurance and managing savings funds. Why do you need to allocate it by 20 percent? Because basically, this type of expenditure is the debt that you have to manage as well as possible. If you do not have this type of expense, or for example, your insurance fee has been paid by the company where you work, you can be quite relieved and allocate it to save.

3. Rule 30

By this rule, it means you have to allocate 30 percent of your income for the purpose of entertainment or the need to meet your lifestyle. For example is a dinner in a good restaurant, shopping clothes, watching movies, buying books. Anyway, you are allotted to the needs of your favorite fun and hobby. If you are planning to purchase certain items to fulfill your passion, for example, if you are photographing camera, then allocate some funds you save each month to buy a camera.

Richard T. Starkey

Author: Richard T. Starkey

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