US Senator Elizabeth Warren popularized the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.” The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants while allocating 20% to savings.
Thereafter, experts have been recommending consumers to save 10-20% of their income. Even in Singapore.
But I have a different opinion on this and won’t recommend people of all ages to only save 10-20% of their income.
Here’s my view.
The 50/30/20 rules works when you’re starting your first job
For someone who is starting their first job, the 50/30/20 budget rule may be a good start since the salary isn’t very high.
According to Straits Times, the median monthly salary of fresh graduates is around $3,400. Let’s break the salary up using the 50/30/20 budget rule as a benchmark. With $2,720 after CPF contribution, that means as a fresh graduate, you should be spending up to $1,360 on needs, $816 on wants and $544 on savings …