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What’s even more important is to find a budget that matches your personality. The 50/30/20 budget method is ideal for people who like tracking expenses and want to follow a guideline. Although it’s called the 50/30/20 method, you can change the percentages so they work for you.

Here's how it works:

Think of your money as going into three different buckets.

Bucket number one is for your needs: 50% of your take-home pay goes towards your essential expenses like housing, groceries, transportation, utilities and other general expenses. Try your best to keep your needs to around 50% of your budget.

Bucket number two is for your wants: 30% of your money should go towards discretionary expenses like travel, subscriptions, dining out with your family and friends. Try to keep your wants to 30% of your budget.

Bucket number three is for your savings and also for paying down debt: This remaining 20% of your money can go towards an emergency fund, investing for retirement, paying down loans, or really any other financial goals you may have.

So, 50% for your needs, 30% for your wants, and 20% for your savings. That’s the 50/30/20 budget.

_{Source: Vanguard}