If you’ve never heard of the 50/30/20 Rule of Money, then if you’re into saving, you’re in for a treat. It works like this.

When you look at your take home pay, that’s your after-tax income, and divide it into 50% on needs, 30% on wants, and socking away 20% to savings, then you will be able to better manage your money.

Note that if you’re heavily in debt, this might not be right for you, and you should be looking to pay down that debt immediately so that you will have more disposable income available in future.

To determine if the 50/30/20 rule is right for you, something to look at is called your debt-to-income ratio. Simply add up your total recurring monthly obligations. These are essentials and obligations, not luxuries. Then divide by your gross monthly income. Once you have calculated your debt-to-income ratio, or DTI, you can figure out whether you can make use of the 50/30/20 rule to help you save. When you have too much obligations or needs to pay for, it reduces your savings and spending potential.

Going through this can also help you identify whether debt consolidation might be something to look into in order to get your personal finances in order. But first, here’s more on the 50/30/20 rule.