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Question: What is the 50/30/20 rule of budgeting and why is it important?
Answer: The 50/30/20 rule of budgeting is a popular method that suggests allocating 50% of your income to necessities, 30% to discretionary spending, and 20% to savings and debt repayment. It is important because it provides a simple framework for budgeting and helps individuals prioritize their spending while also promoting savings and debt reduction. The rule was popularized by U.S. Senator Elizabeth Warren in her book “All Your Worth: The Ultimate Lifetime Money Plan” and has become a widely used budgeting strategy.