Answer: Model
Step-by-step explanation:
AI-generated answer
In the 20-50-30 Model, your net income is divided into three categories: needs, wants, and savings.
To determine how much of your net income would be in each category, you can follow these steps:
1. Identify the three categories:
- Needs: This category includes essential expenses such as rent, groceries, utilities, transportation, and healthcare.
- Wants: This category covers discretionary expenses like dining out, entertainment, vacations, and shopping for non-essential items.
- Savings: This category represents the amount you set aside for future goals, emergencies, or investments.
2. Calculate the percentages for each category:
- Needs: In the 20-50-30 Model, the needs category should account for 50% of your net income. To find the amount, multiply your net income by 0.50 (50% expressed as a decimal).
- Wants: In this model, the wants category should make up 30% of your net income. Multiply your net income by 0.30 (30% expressed as a decimal) to find the amount.
- Savings: The remaining 20% of your net income should be allocated to savings. Multiply your net income by 0.20 (20% expressed as a decimal) to determine the amount.
3. Calculate the amounts for each category:
- Needs: Multiply your net income by 0.50 to find the amount allocated to needs.
- Wants: Multiply your net income by 0.30 to determine the amount allocated to wants.
- Savings: Multiply your net income by 0.20 to find the amount allocated to savings.
For example, let's calculate the amounts for each category using a net income of $3,750:
- Needs: $3,750 * 0.50 = $1,875
- Wants: $3,750 * 0.30 = $1,125
- Savings: $3,750 * 0.20 = $750
In the 20-50-30 Model, if your net income is $3,750, $1,875 would go towards needs, $1,125 would be allocated to wants, and $750 would be set aside for savings.