If you’re in the market for a new budget, you’ve probably heard of the 50/20/30 method, right? The plan is pretty simple: take your income after taxes and divide it– 50-percent on needs; 30-percent on wants; and 20-percent on savings.
How do you differentiate between wants and needs? Well, that is pretty simple. Needs are the things you must pay for and things necessary for survival like rent/mortgage, car payment, groceries, insurance, and utilities. Unfortunately, Starbucks, Netflix and gym memberships aren’t needs. Wants are the things that you spend money on but don’t have to– like a Bentley when a Honda will do just fine.