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Learning how to budget: Simple tips to grow your bank account

Posted at 6:45 AM, Feb 15, 2019
and last updated 2019-02-15 07:54:34-05

About 41 percent of Americans follow some type of budget. Those who don't, may not know how.

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

Experts suggest trying the 50-30-20 plan. Once popularized by U.S. Senator Elizabeth Warren (D-MA), the concept involves a simple breakdown: 50 percent of your income goes toward basic expenses such as rent and groceries. 30 percent goes toward discretionary spending like vacations or nights out. 20 percent goes toward savings or paying off debt.

Experts say commit to saving the 20 percent first before spending the 30 percent.

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.

A 22-year-old who puts away five thousand dollars each year and earns six percent annually will have 1.06 million dollars at age 67 while a 32-year-old will only have 557,000 dollars.

The bottom line: save while you're young and try a budget.

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