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For many people, getting the most out of their hard-earned money can be a challenge. Thankfully, the 50/30/20 rule is here to help! This simple budgeting rule is straightforward, easy to remember, and useful (if you stick to it). According to the rule, you should take 100% of your after-tax income and allocate it in three different ways: 50% for needs, 30% for wants, and 20% for savings. For more on how to use the rule, read on! THE BENEFITS OF THE 50/30/20 RULE BETTER BUDGETING
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It’s here — tax season has arrived! This time of year can feel overwhelming, but it’s also a chance to maximize your savings by claiming deductions you might not even know exist. While many are familiar with the basic deductions like mortgage interest or charitable donations, several lesser-known deductions could help lower your tax bill. Let’s take a look at some commonly overlooked tax deductions that could save you money. State Sales Tax Did you know you can choose to deduct state and local sales taxes instead of state income taxes? This is particularly beneficial if you live in a state without an income tax or if you made a large purchase, such as a car or an appliance. The IRS even provides a calculator to help you determine the deduction. Student Loan Interest Paid By Parents If your parents contribute to your student loans, you may still qualify for a deduction. As long as you’re not claimed as a dependent on their return, you could deduct up to $2,500 of the interest paid.
Needs Half of your money should be put toward necessary expenses: groceries, utility bills, health care expenses, loans, mortgages, and other payments. However, you may need more than 50% of your money to cover your mandatory expenses, and the remaining money should be split between wants and savings as evenly as possible. Your needs could also require less than half of your after-tax income. In this case, use the leftover money to pay down loans and debts so you will have more money to dedicate to savings and wants in the future.
Job Search Expenses
If you were searching for a new job in your current field, you could deduct job-hunting expenses like resume costs, gas and
Wants What good is life if you can’t enjoy yourself? The rule says you should apply 30% of your after-tax income toward your wants. This portion can be spent on everything from tickets to see your favorite sports teams, a premier “Jurassic Park”-themed pinball machine, or eating out at a restaurant. However, it should only apply to things you want to spend money on immediately — not long-term investments. Savings The last 20% is the money you save for a rainy day. It can be cash you are saving for a dream vacation, money invested in a 401(k), or simply put into a savings account. Any long-term investment you make will fall into this category.
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While the 50/30/20 rule is not an exact science, it is worthwhile for budgeting your money responsibly and equitably!
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