1 I hear the phrase discretionary income thrown around a lot. Who has extra money? After I put my paycheck toward my necessary expenses, how much of what's left over should I consider saving or investing-and what can I feel comfortable spending on fun stuff?
Not everyone can have discretionary income, but being savvy about your money will allow you to do as much with it as you can at any income level. It all comes down to smart budgeting.
The most standard budgeting template you'll come across is something called the 50/30/20 rule. Fifty percent of your money goes toward necessities, 30 percent toward wants, and 20 percent toward savings-that chunk encompassing both short-term savings goals and investments. While experts argue about the specific ratios, it's generally a good framework. The exact benchmarks don't matter quite as much as adopting the right mindset.
As Nischa Shah, a qualified accountant and former investment banker who offers financial tips to her audience of over a million YouTube subscribers, explains, the most important step is adopting a mentality of paying yourself first. Most people, she explains, will first pay for their necessary expenses, then spend their money on their wants, and then try to save what's left over, only to find out that they don't have anything left to save. Instead, she recommends taking your goal savings rate, 10 percent at minimum, out of your paycheck straightaway, and spending the rest of what's left over after your fixed expenses as you please.
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