50-30-20 plan can help you budget with simple steps

About 41 percent of Americans follow some type of budget, so what’s holding the rest of them back? Many consider budgeting restrictive or overwhelming. 

Everyone spends money, but not everyone budgets it.

“If you’re ever considering taking a loan out you should first understand the terms and conditions of that loan," said John Haller of the University of Miami.

Try the 50-30-20 plan once popularized by U.S. Sen. Elizabeth Warren.

The concept involves a simple breakdown: 50 percent of your income goes toward basic expenses like rent and groceries, 30 percent goes toward discretionary spending like vacations or nights out, and 20 percent goes toward savings or paying off debt. 

Once you have a rough budget in place, look for ways to earn maximum interest on your savings, and start as soon as you can.

If a 22-year-old and a 32-year-old both put away $5,000 each year and earn 6 percent return annually, the outcome will be much different when they turn 67. The 22-year-old will have $1.06 million while the 32-year-old will only have $557,000.

The bottom line: Save while you’re young and try a budget, you just might like the results. 

Experts say when it comes to the 50-30-20 plan, commit to saving the 20 percent first before spending the 30 percent if you have to pick between the two.

One way to enforce savings: create an automatic online transfer so a portion of each paycheck goes right into your savings account.