The 20-60-20 Rule

As you're thinking about your spending and collecting those trends, you can consider comparing your spending to the 20/60/20 rule. According to this rule, 20 percent of your income should be set aside each month for saving and investing. The rest is in the SPEND section of our checklist. No more than 60 percent of your income should be spent on essential expenses.

This includes things like housing, transportation, food, your kids, health care and insurance. It also includes money spent paying down debt, such as car loans, student loans and credit card balances. The remaining 20 percent of your income can be spent on the fun stuff – the nice-to-haves like going out to eat, the new technology you’ve been eyeing, or the vacation you’re planning.  If your current spending doesn’t line up with this 20/60/20 rule, you’ll have some decisions to make about where you can adjust your spending.  

How to Get There​

Listing everything is key- analyze your bank or credit card statement over 2-3 months for most accurate details on true expenses.

• Take an honest inventory of all the ways you’re spending money.​
• You should account for every expense you have and include it in your budget.​​
• Don’t forget about or omit certain bills just because they occur only once or twice a year.​

​Key Point: As you list your expenses place a star next to those that you can cut back on in the future