I recently read an article that I found on CNN.com that stated over 76% of
Americans are living paycheck to paycheck with 50% of those surveyed had less
than an $800 cushion in the rainy day fund and over 27% get this:
HAD NO SAVINGS AT ALL. Once I read this at that, this has got to change.
We have to get away from this paycheck to paycheck lifestyle. I mean,
I can't blame anyone for it because personal finance,
it was never taught to our parents or grandparents, anybody. Think about it.
The school system really hasn't changed in the past hundred years on what or
even how they teach.
Take a look at these few examples on what the school system thinks is more
important than budgeting or taxes or even credit. How to write in cursive,
how to play hot cross buns on the recorder,
how to find a book using the car catalog system and my favorite,
how to do the macarena.
In this video,
I will show you how to create a budget using the 50 30 20 rule in order to not
only get you on the right financial path,
but also to stop living paycheck to paycheck and live the life that you deserve.
Stay tuned.
What's going on, fam.
Justin Houser here and welcome to the Justin Houser showwwwww where I go over
vital information in only five minutes on how to make you financially smart and
rich. Feel free to check the description below for show notes,
links the recommended products,
and anything that I might've forgot to mention in this video.
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of my future videos.
So let's get into how to create a budget using the 50 30 20 rule.
Imagine for a second that you found an extra $2,000 in your bank account every
month. Could you finally go on that vacation to Paris that you've always wanted?
Could you take your entire family finally to Disney World and stay inside the
park at the Disney resort hotel?
Could you finally get that car that you've always wanted your whole life?
Could you go to that restaurant and not have to worry about the price or even
how much you should tip?
Could you finally become debt free and fully invest in yourself,
your retirement and kid's college savings? Sounds like a dream, doesn't it?
But how do I make that a reality? It's simple. Really.
It comes down to probably the most dreaded six letter word in the dictionary
budget. Look,
I know a budget isn't sexy and it's not going to make you a millionaire
overnight and according to a bunch of gurus isn't necessary,
but they are wrong.
It is the most crucial step in building wealth and becoming financially free.
No matter if your goal is to simply become debt free,
make an extra $500 a month or to take over the number one spot on the Forbes
richest person in the world list.
Every successful business or person has a budget and they stick to it.
If a company as big as Amazon or Microsoft or individuals such as Jeff Bezos,
Warren Buffet, or Bill Gates have budgets, why shouldn't you?
So let me tell you a trick.
Follow what the top 1% is doing financially as they leave clues on the daily.
So it's cool Justin, man, I'm psyched up.
I'm ready to become the next self made billionaire,
but how do I make this budget in order to make a budget following the 50 30 20
rule, it requires 4 fast and simple steps.
The 1st step in creating a budget like the 1% is to figure out your net income
or after tax income. This is what you physically get paid to your bank account.
If it's set up as a direct deposit after all taxes for one contributions,
health insurance, et cetera is taken out.
The 2nd step in creating a budget like the 1% is to choose your budgeting plan.
There are alot of different budgeting plans out there such as the envelope
system made famous by Dave Ramsey,
the zero based budget and a 50 30 20 budget,
which is the plan that I prefer and recommend.
The 3rd step in creating a budget like the 1% is to track your progress.
There are many tools that you can use,
whether it's old school and you want to use notebooks,
sticky notes or Excel spreadsheets or you can use a bunch of different online
budgeting tools which I recommend such as Mint,
link below if you want to check it out.
The 4th step in creating a budget like the 1% is to automate your savings and
then revisit them at minimum on an annual basis.
Automation is key as you want to create the budget, automate your savings,
debt repayment,
and then eventually your investment accounts with minimal effort on your part.
I also recommend that you revisit and check your budget at least annually as
expenses,
income and what you deem as a priority changes over time.
So why the 50 30 20 budgeting plan? SIMPLICITY! Simplicity is the key.
When it comes to something like budgeting,
you do not want to overcomplicate something this crucial as it will lead to you
eventually slipping from your plan or even stopping later on.
The good thing about having a budget that you stick to will allow you to slip
sometimes to indulge in that raspberry cheesecake at the Cheesecake Factory that
wasn't part of your budget, my favorite,
and to pay for those unexpected expenses. In short,
here's what the 50 30 20 rule stands for. The 50 stands for Needs,
the 30 stands for Wants, and the 20% stands for Savings and Debt Repayment.
So let's dive a little bit deeper in exactly what the 50 30 20 rule is.
So 50% of your net income goes to your Needs.
So what exactly is needs? Housing, transportation, groceries,
utilities such as like electricity, gas, insurance, childcare,
and minimum loan payments.
Anything outside of the minimum goes to the 20% category of this rule,
which I'll go over later in the video. Now,
the top question I usually get when explaining this to someone is what if my
needs require more than 50% of my net income, as the rule suggests?
That's a valid question and I usually respond to them by asking them,
show me all of your needs.
Usually their needs are actually wants and should be moved to that category or
they might need to find a cheaper cell phone plan.
The newest iPhone doesn't constitute a need when following this budget.
Or maybe it's time to switch insurance companies,
shop at a different grocery store, stop taking a bath every single night,
or even refinance your mortgage or your car.
The next part of the 50 30 20 budget is the 30%, which is used for Wants.
Now,
this is a very complicated one to explain as it can widely differ from person to
person. So this will be a general assumption.
Separating and distinguishing between something that is a need and something
that is a want can be very difficult. Personally,
I differ two saying a Need is something that I have to have in order to live,
IT'S THAT SIMPLE. A Want could be traveling, going to sport games,
restaurants,
etc. So when it gets difficult is when you start talking about gym memberships
or grocery stores.
Now experts say that you shouldn't have money set aside for entertainment,
restaurants, etc. when you're trying to get out of debt fast.
I understand where they're coming from, but in this aspect,
I absolutely disagree. Budgets need some wiggle room.
It is not a straight jacket holding you from enjoying what life has to offer.
I don't know about you, but if someone controlled all of my money,
I wouldn't last very long at all.
I personally would become miserable and not want to budget whatsoever.
I would even want to spend more money on the ridiculous items just to break up
the pattern and try to enjoy life more.
And the last part of the 50 30 20 budget rule is savings and debt repayment.
Now I am a big component of this part of the budget rule.
Just like mentioned at the beginning of this video,
over 76% of Americans are living paycheck to paycheck with 50% of those surveyed
had less than $800 in their rainy day fund and over 20% had no savings
whatsoever. Believe it or not, emergencies happen all the time.
Your car breaks down,
your A/C in your home stopped working and needs to be replaced or your son
needed to be rushed to the emergency room because he decided,
in his own infinite wisdom,
that the 2 handlebars on a bike actually only needs 1 hand.
You need to be prepared for these times as they will come.
This step will require you to split up your savings and your debt repayment
process. In my experience,
This is the best way to divide the 20% up or until you become free of the toxic
deck and then the real freedom begins. Number 1,
you need a starter emergency fund.
How much you might ask $1,000 why $1,000 because it will cover most small
emergencies or repairs that will occur as you begin this new budget.
For me personally,
just to have even a little bit into savings to cover for an emergency helps me
sleep better at night. Number 2, once your starter emergency fund is complete,
match your employer's 401k. Well,
I think the Roth IRA is a better investment for retirement.
I still don't think that you should throw away free money. Number 3,
start paying down the toxic debt that you have.
What is constituted as toxic debt, credit card debt and personal loans.
Side note, make sure you check out my entire playlist on credit hacks.
Link right up here on top and also down in the description below. Number 4.
Once this is paid off,
there are a couple of different ways that you can go from here.
Either invest or you can pay off your remaining debt. Personally,
I would recommend that you go and once the 401k is matched as a previous step
said you should go and max out your Roth IRA.
Once your Roth IRA is fully maxed out,
then contribute back to your 401k additionally or even index funds until you
reach that 15% Mark. Number 5 is to fully fund your emergency account.
Financial experts recommend that you have between six to 12 months of expenses
in emergency fund to cover anything larger than your initial thousand dollars
starter emergency fund, such as a job loss or a big medical bill.
So there it is. How to create a budget using the 50 30 20 rule.
I hope this video has helped you out, and if it did,
can you SMASH THAT LIKE BUTTON,
Share it to everyone you know and leave a comment below. Question of the Day:
How much debt have you paid down thus far?
Please leave your answer below as I would love to connect with you.
Thank you for being part of the community and remeber:
God sees you and He loves you. See you on the next video.