BALTIMORE — Forty-one percent of Americans follow some type of budget and that leaves the majority of us not on a budget. So, what's the hold up?
Many consider budgeting restrictive or overwhelming, but there’s a simple way to spend and manage your money.
Try the 50-30-20 plan.
Once popularized by U.S. Senator Elizabeth Warren, the concept involves a simple breakdown:
- 50 percent of your income goes towards basic expenses (like rent and groceries)
- 30 percent goes towards discretionary spending (vacations, a few nights out on the town, etc.)
- 20 percent goes towards savings or paying off debt
Once you have a budget in place, look for ways to earn maximum interest on your savings and start as soon as you can.
If a 22-year-old and a 32-year-old both put away $5,000 a year and earn 6-percent return annually, the outcome will be much different when they turn 67. The 22-year old will have $1.6 million and the 32-year-old would have $557,000.
Experts say when it comes to the 50-30-20 plan, commit to the 20 percent first before spending the rest. The best way to do this is by picking the automatic online transfer so a portion of each paycheck goes right into your savings account.