This tool is for calculating your monthly life budget based on your annual salary. In this tool, costs are assumed to be three general categories of Essentials, Wants, and savings.
To budget for living expenses, we have followed the 50/30/20 rule, which is one of the simplest and most useful rules for classifying income and saving money.
50/30/20 rule is an easy budgeting method that can help you manage your money effectively, simply, and consistently. The basic rule is to divide your monthly income after tax into three categories: 50% for Essentials, 30% for wants, and 20% for savings or debt.
Knowing exactly how much you need to spend for each category will make it easier to stick to your budget and help control your spending.
Here is the budget that follows the 50/30/20 rule:
Simply put, needs are expenses you can't avoid - payments for all the essentials without which life is difficult. 50% of your income after tax should cover your most essential expenses.
Essentials may include:
With 50% of your after-tax income to meet your basic needs, 30% of your after-tax income can be used to meet your wants. Wants are defined as unnecessary expenses - the things you choose to spend your money on, although you can live without them if you have to.
These may include the following:
With 50 percent of your monthly income going to your Essentials and 30 percent to your wants, the remaining 20 percent can be used to achieve your savings goals or repay your outstanding debts. Although a minimum repayment is considered a requirement, any additional repayment reduces your existing debt and interest, so they are classified as savings.