There are two formulas to follow in order to prioritize savings.
The first formula is the 80-20 rule. It is a widely used formula and is highly acknowledged as an efficient method for saving. The rule is simply to set aside 20% of your net income for your savings. While the other remaining 80% is allotted for your expenses, fifty percent goes to your needs and thirty percent goes to your wants. This formula allows you to not just only save but as well as provide for your needs and at the same time reward yourself once in a while.
The second formula is the 10-20 70 rule, 10% goes to tithing, retirement, or donation. The 20% goes for your savings and the remaining 70% is allotted to your monthly expenses. The 70% is subdivided into two: 50% goes to your needs and 20% goes to your wants.
But have you ever wonder, why is the formula in saving money use percentage rather than numbers? It is because the percentage makes the computation easier rather than number as monthly income varies from time to time. Above all, saving money does not only require discipline but also the proper allocation of one’s finances. Without proper discernment between your needs and wants as well as key financial priorities then, the formula will be useless after all.
Source: Website: Rappler Published 10:49 AM, July 07, 2014. Retrieved from: https://www.rappler.com/business/personal-finance/62577-80-20-money-saving-formula.