The last two months of the year are often the months when people spend the most money. It is easy to let bills pile up as you purchase holiday gifts for friends and family, meet up for dinner with coworkers, or plan a vacation. However, there’s no reason why you need to end the year on a poor financial note. It is actually possible to stay on track with spending during the holidays. Taking just a few steps to be financially savvy as the year winds down can help you to begin the next year on a healthy financial foot. There’s no need to fear the new year when you plan for the holidays wisely. One of the best ways to make sure you don’t let your spending habits get away from you is the 50-20-30 rule.

Why You Should Use the 50-20-30 Rule

The 50-20-30 rule is one of those very simple financial rules that can actually change the way you look at money forever. The rule simply states that you should divide your money into three categories as soon as you receive a paycheck. Here’s how it breaks down:

  • 50 percent for needs
  • 20 percent for savings and debts
  • 30 percent for wants

The 50-20-30 rule is especially effective for people who have never managed their finances. This method doesn’t force a person to feel deprived. In fact, it allows people to actually enjoy their money more because they understand that they have a full 30 percent of each paycheck to use however they want to. The 30 percent category can be used for anything that you can’t live without. Many people find that they actually would like to adjust the formula to reduce their category for wants down to less than 30 percent. The flexibility that is involved helps to create a very empowering feeling.

How It Can Help You Stay on Track During the Holidays

The 50-20-30 rule works best when implemented at the beginning of the year. However, it’s not too late if you need a way to stay in control as temptations for holiday spending creep up. It’s fine to simply stop wherever you are right now and decide that your next paycheck will be divided up into three categories. How can you adjust the 50-20-30 rule for holiday spending? Many people would be tempted to stop paying down debts or put off moving money into savings during the holiday season in order to leave more money for gifts or vacations. However, you are only borrowing from your future self when you do this. The key is to save now to avoid the need to make up for lost funds later by taking out a loan. Make a commitment to stay on track with paying off debt and putting money aside for savings even during the holiday season. This will make it easier to start the new year on a good path. That means that you really have to make the most of that 30 percent. How do you do that? It’s not as hard as you might think.

How to Maximize the 30 Percent

The reality is that 30 percent of your paycheck is a very good amount to work with. You may want to plan to rework the way you spend during November and December if you want to free up some funds. Maybe you’ll want to skip takeout nights or even put some entertainment subscriptions on hold until the new year. This will give you more money to use for meeting up with friends for holiday dinners or purchasing gifts for family members. The important thing about the 50-20-30 rule is that it gives you a chance to really look at what you have to spend and figure out ways to play around with that number to get the most out of it. You can reevaluate and readjust how you spend your 30 percent once the next year starts. The important thing to remember is that budgeting is not a punishment! Budgeting today is a way to reward yourself tomorrow.

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