The 50-30-20 Rule. What is that?

The percentage of income that most millionaires invest can vary widely depending on factors such as their age, risk tolerance, and personal financial goals. However, it is generally recommended that people save and invest a significant portion of their income in order to build wealth over time.

One commonly cited rule of thumb is the “50/30/20 rule,” which suggests that you should allocate 50% of your income to necessities (such as housing, food, and transportation), 30% to discretionary spending (such as entertainment and travel), and 20% to saving and investing. This rule is a general guideline and may not be appropriate for everyone’s circumstances, but it can be a useful starting point for thinking about how to allocate your income.

Many successful investors and financial experts recommend saving and investing even more than 20% of your income, particularly if your goal is to build wealth over time. Some suggest that saving and investing as much as 50% of your income can help you reach financial independence and retire early. But it’s also important to strike a balance, because too much saving and not enough spending can make you unhappy and lack the resources to enjoy life.

It’s also important to keep in mind that as income increases, expenses tend to increase as well. People who earn high incomes may be able to save and invest a higher percentage of their income than those who earn lower incomes, but they may also have more expenses that eat into that income.

It’s best to have a look at your own spending and expenses, create a budget plan and stick to it, and assess the room you have to save and invest in what you can afford and what aligns with your long-term financial goals.