Using 42121 for budgeting is way better than 532

If you are wondering what these numbers are all about… let me explain.

For some context, the 5/3/2 rule is a simple budgeting guideline that suggests allocating:

- 50% to Expenses

- 30% to Short Term Savings

- 20% to Insurance & Long Term Savings

And while this rule can be a helpful starting point for people looking to create a budget…

It does have a huge drawback.

It’s too generalized and vague.

Some people allocate the full 20% to insurance and don’t think about their long term investments and vice versa.

Some even end up using the full 30% of their short term savings on vacations/shopping when it’s supposed to help them accomplish their short term goals.

And that’s why, the 4-2-1-2-1 method that I’ve learned is WAY better that I even adopt this approach for my clients’ financial planning.

As usual, swipe left to get more financially savvy ;)