The 50/30/20 Rule
The 50/30/20 rule is an intuitive and simple investment plan recommended by many self-made millionaires. The 50/30/20 helps you get better control over your spendings and helps you save more money. The rule states that 50% of your earnings after tax should be spent on your needs, that is all the essential stuff needed to live comfortably, nothing more. The 30% is for investment, you should invest at least 30% of your after-tax earnings into stocks and/or tax funds. The remaining 20% is spent on your wants, that is all enjoyment for your own purposes.
Even though the rule states that 50% goes to needs, 30% to investments, and the remaining 20% to enjoyment, it all still depends on your salary and earnings. For example, if your salary is very low then maybe instead of 50% you’ll need to spend up to 80% of your after-tax salary on the essentials, 10% towards investments, and 10% on your own enjoyments. On the other hand, if you have an above average salary, then maybe only 20% of your after tax earnings will need to be spent on the essentials. No more than 30% should be used for your own enjoyment if you are aiming to achieve financial freedom.