Feb 5, 2017
Pattie's financial tip of the day: Allocate 20% of your income towards financial priorities
Consider allocating 20 per cent of your income towards financial priorities.
This isn't my rule, but I agree with the application of it.
By priorities, I'm referring to tucking a little away for an emergency, paying off debt or topping up your retirement savings. According to the 50/30/20 rule, your monthly budget should be divided into three distinct categories of expenses: 50 per cent should be reserved for essentials (think housing and food), 30 per cent should be allocated for lifestyle choices (things like nights out and a gym membership), and at least 20 per cent should go toward what we call “financial priorities,” which include debt payments, retirement contributions and, of course, savings.
How you divvy up the 20 per cent will of course depend on your financial situation but typically emergency savings and high interest debt often battle it out for top spot. Retirement savings is a popular third especially if you are in your 40s, 50s or 60s. If the percentage allocation is out of whack the first course of action is to rebalance and that may mean cutting back on lifestyle choices to redirect toward financial priorities.
CTV's Chief Financial Commentator Pattie Lovett-Reid offers a financial tip of the day during the month of February for Your Money Month.
