2. Make use of the 50/30/20 allocation rule: 50% of your income allocation should go to taking care of essential expenses and immediate needs. The mistake people often make is neglecting this aspect, forgetting that it is actually inevitable and unavoidable, even when you manage to avoid it today, it'll come back tomorrow bigger, and you'll be forced to still sort them out, thereby messing up your plans. 30% goes to your discretionary income and the other 20% towards your savings and also for debt repayments.
Adopting the DCA strategy as guide was totally resourceful to me,though the 50%,30% and20% could be adjustable depending on personal priorities at the moment,investment requires nothing but determination so that the end result will turn out juicy,sometimes circumstances could change the initial plan to 40%,40%,20%,this is where I totally advice investors to focus on initial decision and be determined to survive outside the investment so that one's result wount fluctuate when others are rejoicing.
There are some problems with the division, and sure it could be possible that we could elect to have our basic expenses to be somewhere in the ballpark of 50% of our income, and once we figure out what our basic expenses, then the rest is discretionary income.
Portions of our discretionary income that we allocate towards debt servicing is not discretionary income, that is part of basic expenses.
With our discretionary income we can choose to invest (save), or consume. Each of us can figure out how much of our discretionary income we want to allocate to each of these.
Most people are not going to have 50% of their income as discretionary income, so 50% is pretty high. many will fit somewhere in the ballpark of 10% and 30%.
Honestly, I get your point, and it makes a lot of sense because debt repayment should really be treated as a necessity and not part of discretionary spending.. But I think where many people struggle is that the whole percentage allocation Isn’t always a fixed formula that works. Life throws unexpected costs at us, maybe rent hikes, health bills, family responsibilities, and those can easily push what was once discretionary into being absorbed by basic needs..
In my opinion, the healthiest way to look at it is not strictly chasing a certain percentage, but more about building a flexible system where saving and investing become non negotiable, even if it is just 5% at first. Over time, as income grows or debts reduce, you can gradually shift more into discretionary investments. That way, you are not pressuring yourself into an unrealistic 50/30/20 type model, but you are still making progress without neglecting essentials..