For those with bad credit who often have a hard time saving, certain tricks, like the 50/30/20 budget rule, can be game changers. This rule enables you to already know where your money is going before you even earn it by dividing your after-tax income into three distinct categories: needs, wants, and savings.
To abide by this rule, at least 50% of your after-tax income should automatically be taken out to cover all expenses deemed necessary – and by necessary we mean things you absolutely cannot avoid paying or living without. This can include costs like your rent/mortgage, insurance, utilities, vehicle/transportation, health care, food, minimum debt payments, clothing, gas, and other recognized essential items.
This percentage should represent your “wants.” Now, it might be easy to put many of the things that should be on this list, in your needs list, but the fact remains budgeting isn’t always fun. Expenses like eating out, streaming services, video games, entertainment, shopping sprees, new/expensive, makeup, electronics, nights out at the bar (alcohol), attraction visits, new toys for the kids, and more are technically unnecessary for basic survival, and therefore are all things you can reasonably live without.
The smallest, but likely most important, little chunk of money you’ll need to account for is your savings. This is the money you will either put away to save for an emergency, or use to help pay off existing debts faster. This is the money that will help shape your future. The more you put away and save, the more money you’ll have later down the line for whatever you might need. You can use it to invest in your retirement, get rid of credit car/student/medical debts, fix/renovate things around your home, save for college, or otherwise set yourself up really good to take an incredible vacation with your loved ones. Ultimately, if you use this rule responsibly and pay everything off over time, eventually your savings will be just that – your savings to do with as you please.
Just know, if you’re budgeting because you’re considering purchasing a reliable used vehicle and you need to closely monitor your expenses, our financial professionals at Suburban Auto Finance can help. Our auto financing is designed to take into account the specific financial needs and limitations of applicants with bad credit to ensure that all have equal opportunity to enjoy the freedom of independent transportation, and we will always respect your budget! Apply Now to get your preapproval so you can start car shopping our available inventory right away!