Here are some key points to know about this money rule: – 33% for living expenses and necessities: This portion covers essential expenses such as housing, utilities, groceries, insurance and any other costs crucial for your day-to-day living.
Sticking to this limit encourages efficiency and can help prevent overspending on needs.
33% for savings and investments: Allocating a third of your income to savings and investments is pivotal for building a robust financial future.
This can include contributions to retirement accounts, emergency funds, stock market investments or real estate. The emphasis here is on growing your wealth over time and preparing for retirement.
33% for discretionary spending: The final third is reserved for discretionary spending, which covers leisure activities, hobbies, travel, dining out and other non-essential expenses.
This segment ensures that you can enjoy your life and reward yourself without guilt, as long as you stay within the designated one-third of your income.