How to Divide Up Your Savings

    Every time I receive my paycheck, I always have to resist the urge of going out and spending it all right then and there, but with this technique I’ve realized that it helps me maintain my money to last. The method is the 50/20/30 method. You may have heard of it before, but if you haven’t, it's where you take 50% of your earnings and put them towards your needs, 20% towards your savings, and 30% towards your wants. It's effective because I know where my money is going and how much I’d need to spend for each category.  

Needs - 50%

    The very first and most important thing that you should be paying when you get your paycheck is your necessities. This could include your mortgage, groceries, insurance, and bills for electricity, water, internet, etc. You should prioritize around 50% of your paycheck to needs because these are what keep you going. As much as I hate to admit it, daily Starbucks and Netflix subscriptions aren't considered a need, but rather a want, no matter how much I feel the need for my daily Starbucks.

Savings - 20%

    The next category that you should dedicate 20% of your paycheck to is savings. It doesn’t matter how you divide up your money in the savings category, but I’ll give you an example of what it could look like. Half of the savings should go into a retirement fund. A quarter of it should go into paying off debt, and the remaining 5% of the savings should go into investing. If you have no debt though, keep this extra money in an emergency fund just in case anything were to happen. Over the course of a year you should also donate your money maybe once or twice and this could be around 5% taken from the savings.

Wants - 30%

    Now here's where we get to the good stuff, the wants. Here is where my Starbucks addiction would go and my Netflix subscription. This would also include eating out at restaurants, going ice skating with my friends, getting my nails done, or buying piles of clothes at the mall. This 30% is money that you can use for whatever you want. This doesn't mean that you go out and spend it all in one go. Remember this rule, if you can't buy it twice, then it’s not worth splurging on right now. But hey, don’t let me stop you from buying a new pair of cute boots for the winter time.

    Make sure that when you receive that paycheck, you think about where you’re putting your money so you don’t blow through it all in one day, and let me know how you divide up your money and what categories you decide to create.