To succeed in saving, divide your expenses into three categories: this method, still relevant in 2023, was proposed by US Senator Elizabeth Warren in a book published in 2005.
New year, new projects! If saving was one of the goals of 2023, the American way might just make it easier for you. The rule of thumb is to divide your budget into three categories so you can put money away at the end of the month. It was popularized by US Senator Elizabeth Warren in a book Your full value. The ultimate money plan for life (understand, Your full value, the best financial plan for life), published in 2005, as cited in the article Forbes: in March 2022.
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Necessities vs. non-necessities
As a rule, 50% of our budget should be spent on “needs”, meaning rent, food, transportation, medical expenses, and possible child expenses. 20% of monthly income will be saved for specific purposes such as loan repayment or real estate purchase. The remaining 30% of the budget can be spent as you wish, just for fun. “This last category represents the non-essential costs we could do without,” the article notes Forbes:. For example, drinks with friends, new clothes or subscription to different streaming sites.
This method is “a good way to get used to making saving and paying off debt a consistent part of your budget,” the article says. Forbes:. But this rule can be difficult to follow in a city with a low income or a city where the cost of living is high,” the journalist qualifies. However, Elizabeth Warren’s tip can be used to identify excessive non-essential costs and guide any adjustments to be made.
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Source: Le Figaro
