If you’re not tried budgeting yet, I would recommend you start tracking where your money goes. There are several reasons you want to start a budget, staying on top of your money is one of them.
Simply said: you spend 50% of your budget on needs, 30% on wants, and 20% on savings and debt payoff.
– 50% on needs, like groceries, utilities, and housing costs – 30% on wants, which includes all luxuries – 20% towards debt and savings.
First, you need to calculate your after-tax income. Then you lower your expenses in such a way that you spend 50% on needs, 30% on wants, and have 20% left to save and pay off debt.
Anything that is a primary need, you want to have that covered. Things like health care and water are for sure primary needs. The quality of your life would drastically decrease would you not have that.
The 50/30/20 rule works for many people. As with anything in personal finance, it is personal whether or not this will work for your specific situation.