Question

50% to needs 30% to wants and 20% to long-term savings

a) 50/30/20 rule
b) Budgeting principle
c) Savings plan
d) Financial distribution strategy

Answer 1

The 50/30/20 rule is a budgeting principle that suggests allocating 50% of income to needs, 30% to wants, and 20% to long-term savings. This rule helps individuals prioritize their spending and saving habits.

Step-by-step explanation:

The 50/30/20 rule is a budgeting principle that suggests allocating 50% of income to needs, 30% to wants, and 20% to long-term savings. This rule helps individuals prioritize their spending and saving habits.

By following this rule, individuals can ensure that they are covering essential expenses (needs), indulging in nonessential expenses (wants), and setting aside money for future goals (long-term savings).

For example, if someone has a monthly income of $1,000, they would allocate $500 to needs, $300 to wants, and $200 to long-term savings.