The important aspect of making more money is through better management of money. This can be done through budgeting your monthly income. This is where the budgeting rule like the 33-33-33 rule comes into the picture.
Even if you pay a financial advisor to get your finance on track, the first question they would ask is how does your monthly budget looks like. Budgeting is an important aspect of money management. One of the shows that I enjoy watching is the Dave Ramsey Show.
When Dave gives his opioin on finance related problems. The first thing he asks for is the monthly budget and how they plan their living. And 9/10 times the people with money problems are the ones with no budget.
A personal budget is defined as a finance plan that allocates future personal income towards expenses, savings, and debt repayment. Past spending and personal debt are considered when creating a personal budget.
I personally am budgeting my monthly income for the past 2 years. I have dabbled around multiple budgeting techniques. Some of them include the 50-30-20 rule, 80/20 rule, etc. These budgeting techniques are unique and might not suit all kinds of people.
So if you are starting with budgeting make sure to read about multiple budgeting methods. If you are not sure which one to go for then test each of them and select the one that suits you.
The 33-33-33 rule of money management is best suited for teenagers or people with less to no responsibility. If you are a married man then this budgeting technique might not be the best fit for you.
The 33-33-33 rule is quite robust and focuses on saving a good amount of money. We will understand the budgeting rule in greater depth in this article.
I personally use the 33-33-33 rule to budget my money. Due to this pandemic, I don’t really have any transportation costs which increased my savings. So I decided to increase savings in my budget and started following the 33-33-33 rule of budgeting.
Table of Contents
What is the 33-33-33 rule?
The 33-33-33 rule is a simple but robust budgeting technique. The rule intends to help the layman with managing their monthly budget and save more for the rainy day.
There are 3 aspects of the 33-33-33 rule. Which includes expenses, wants, and savings.
The 33-33-33 rule says that the monthly income needs to be divided into 3 parts. The first 33% to go for monthly needs. The second is 33% for your wants like shopping and traveling and the last 33% towards investments and savings.
How to use the 33-33-33 rule
As mentioned earlier the 33-33-33 rule has 3 aspects. The first is Monthly expenses(needs), your wants, and Savings.
33% for Needs.
The breakup of 33% of the allocation to monthly expenses is quite unrealistic. Since the majority of the amount of money is spent on paying bills, groceries and getting this under the budget of 33% is difficult.
The 33% for expenses or Needs includes your monthly groceries, bills, and health requirements like medicine, etc.
Can you see the problem? Yes, 33% for these expenses are not really feasible, but I manage it since I live with my parents, so the expenses are shared. This makes it easier for me to save more.
33% for Wants.
The wants category can sometimes be quite tricky. This is the category which you can manage to minimize your expenses and you might give more share towards your needs. The wants include your shopping expenses, OTT subscription, etc.
Anything that you can live without, but buy simply for pleasure. Many of us work hard and it’s ok to treat ourselves in the end. So make sure you still keep some money in the budget for wants.
I spend this 33% by buying gadgets, of which I do review for my youtube channel. Then also to buy takeouts sometimes. I try to minimize these expenses as much as possible.
The savings are the first thing that I budget for. The 33% are not all invested in one place. I have a monthly SIP for mutual funds. Apart from mutual funds I also invest in stocks every month. I also hold a portfolio of cryptocurrency.
But my savings also go to building my emergency fund and my savings. These account for 75% of my portfolio. Make sure you don’t put all your money in one place and You diversify your income and balance your investment.
Is the budgeting rule any good?
I have incorporated the 33-33-33 rule in my daily life. I started with the 50-30-20 rule but it was too conservative of an approach to finance for me. Since I am still a bachelor and not in any relationship I am able to save more.
I budget my finances by using the 33-33-33 rule. I allocated a budget of 33% of my income for monthly needs such as my expenditures, bills, etc. Then I allocated 33% for my wants, these were my takeouts, clothes, and gadgets that I buy for review.
Then the 34% left is allotted to build my diversified portfolio. Though I have taken the approach of creating a healthy Emergency fund first. So my Portfolio currently looks something like 50% savings, 25% Emergency fund, and 25% investment.
I intend to change these values by making my investment value at 50% of my portfolio and savings at 25% and the emergency fund still at 25%. But since this is a start and my valuation has not crossed a million so I still follow the old way.
With my own personal experience, I would say this is one of the best budgeting techniques for teenagers and bachelors. When you don’t have enough responsibility and can fiddle around with your money.
I have created a Notion template for the 33-33-33 budgeting rule. If you wish to use the notion template which is completely FREE by the way, you can connect with me on Twitter and DM me if you want the 33-33-33 budgeting template.
I will DM you the link to download the Notion template. Here is the link to my Twitter profile.
I have been personally using the 33-33-33 rule for budgeting my monthly expenses. Though I will say this method is not feasible in a long run, but it is currently working for me.
If you are a young teenager looking to manage his/her expense then this is the best method for you. Otherwise, you can also go with the 50-30-20 rule.