Saving is a habit that is cultivated, and although there are several methods to do it depending on the amount of income, it is important to start as soon as possible.
The 50/30/20 method is one of the best known for dividing the monthly budget. It is an idea popularized by Elizabeth Warren, economist and author, and which consists of allocating a percentage of income to different areas.
At basic needs, such as food, education, housing, basic services, and health insurance 50% of the budget is assigned to them. 30% goes to hobbies and desires, such as going out to the movies, restaurants or hobbies. The remaining 20% of income should be used solely for savings.
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However, this technique can be a problem when the income is not enough to cover the basic needs with only 50% of the salary. Financial coach Cynthia Farah explains that “we can all use this method, but, If our income still does not allow us to distribute money in this way, we can review our budget and create more sources of income.”.
In Ecuador, the current basic salary is $425. Someone making $450, using the 50/30/20 method, should spend only $225 on basic needs. For your entertainment, you would spend $135 a month and $90 would be for savings.
According to data from the National Institute of Statistics and Censuses (INEC), the basic family basket for 2022 is USD 751.04. According to an article published by Primicias, the parameter of this basket is “the set of essential goods and services to satisfy the basic needs of the prototype household”, which is made up of four members.
That makes the 50/30/20 method an almost unfeasible option for people who don’t earn enough per month, so financial advisers recommend starting to save in whatever way possible.
“Saving is a habit that is not created when we have more money but now, even if it is starting with 1 dollar”, affirms Farah. Either with the 50/30/20 technique, if you have a larger salary, or with a method more adapted to your budget, there are no excuses for not starting to save.
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
