For people who are just starting out with their first job, or even those who have been on their own for decades, having a plan for your money can be hard. Most of us simply fly by the seat of our pants, checking our accounts to see if we have enough money to pay the bills that week, and then trying to hold on until payday.

1. The 50/20/30 Rule of Investing
For people who are just starting out with their first job, or even those who have been on their
own for decades, having a plan for your money can be hard. Most of us simply fly by the seat of
our pants, checking our accounts to see if we have enough money to pay the bills that week, and
then trying to hold on until payday.
A sound money strategy can go a long way, not just in paying off debts and planning for
retirement, but in the simple peace of mind. If you're confused on where to start, the simple
50/20/30 plan is a great rule of thumb to get going.
1. 50% Goes Towards Essentials:
An essential is anything you must have in order to survive and most likely cannot get out of
paying, no matter how hard you try. For instance, you have to have a roof over your head, you
have to eat, and you have to have transportation (even if you don't own a car), so all of that falls
into this category. Though this 50% metric may seem a little high, once you tally up all the
things that fall into this category, you'll see that it hits right about even.
What is essential to you can change from person to person also. Someone who lives in a place
that is expensive (like NYC), may be able to walk to work, while those living out in the suburbs
may have lower housing but higher transportation costs. Don't forget to include utilities when
factoring in the basic housing costs as well.

2. 2. 20% Goes Toward Savings:
No matter how old you are, you need to be planning for your retirement NOW. The best asset
you'll have at your disposal is time, so make the most of your compounding interest and any
employee compensation package you may have by contributing to this bucket regularly.
This category also applies to debt payments such as student loans or credit cards - anything you
pay in advance in order to get ahead. Everything in your "savings" budget line comes after your
necessary expenses have already been paid and will contribute to a stress-free future, like a rainy
day fund, for example.
3. 30% Goes Toward Personal:
This is not fun money; "personal" expenses are anything that is somewhat unnecessary that
enhances your lifestyle. This is, by far, the most fluid category of the three, and most financial
experts have a hard time deciding what is "necessary" and what isn't, so use your best judgment.
While a cell phone may not be necessarily considered a "luxury," the type of phone and plan you
buy may be, so budget accordingly.
Other things that may fall into this category are leisure or personal pursuits, like a gym
membership, Netflix account, or travel fund. Out of your entire take-home pay, only 30% should
be appropriated towards these types of expenses, but remember: the fewer costs you have in this
category, the faster you can contribute to the other categories that will make your life easier.
Edward Schinik has been with the Investment Manager since 2009 and has been with one
Affiliated Investment Manager since 2005.