Managing Existing Credit: Using The 50/30/20 Rule!

July 9, 2024

Managing Existing Credit

I get it – managing existing credit can be a major hassle if you are coping with financial stress. You worked hard to earn a good paycheck. However, instead of spending it on what you want – you must now follow credit management practices to ensure you spend it wisely, reduce your debts, and save money by the end of the month!

However, I’m surprised that most people don’t manage their credit and debt. After getting their paycheck, they spend it all. Therefore, they only get to save (if any) whatever their bank balance at the end of the month.

While this might work for students, adults must think differently. As an adult, I (and my family) have various materialistic and world desires. Buy a new 3 BHK flat, a Tesla Model 3, vacation to Cancun, etc.

Therefore, I learned the 50/30/20 for managing existing credit and fulfilling my goals. This rule helps me spend money wisely – and save money for future emergencies!

Therefore, do you wish to do the same? Then read this post till the end!

Managing Existing Credit: Why Is It Important?

Managing Existing Credit Why Is It Important

Managing existing credit can be difficult if you don’t follow the best debt management practices. However, credit management isn’t just about managing your debt. It also deals with managing your earnings and overall finances.

Most people make the mistake of not managing existing credit without a plan. Therefore, if you wish to accomplish your financial and materialistic goals, you need a solid credit management plan.

But why do you need a good plan for managing existing credit? What about mastering the art of building credit from scratch?

Having such a plan will benefit you in many ways, like:

1. You Get to Spend Your Credit Wisely

“Never spend your money before you have it.”

This is a famous quote regarding managing existing credit by Thomas Jefferson – one of the Founding Fathers, third President, and the primary author of the Declaration of Independence of the USA.

Thomas Jefferson.

However, while he might have said these words in the early 1800s, they are still relevant today! 

Therefore, if you master the art of managing existing credit – you will spend money wisely on essentials for survival. This way, you might never have to take loans in the future to pay off your credit dues!

2. You Face No Difficulty in Repaying Your Dues

Getting a personal loan without income proof from the bank or borrowing money from your friends is sometimes necessary.

Everyone has terrible financial patches in their life. You might lose your job, or your business might get wound up, leading to heavy financial stress. Therefore, you might have no option but to borrow money on credit.

However, if you’re not managing existing credit – you will have difficulty repaying your loans. Therefore, you must manage your credit wisely to have an easier time during tough times.

3. You Can Maintain a Good Credit Score

When you take out loans from the bank, they expect you to pay their installments by the due date every month.

However, they will also mark you and give you a grade for your trustworthiness regarding loan repayments. Based on your credit history, this score is known as your Credit Score.

Your credit score will increase if you pay your credit dues (like loans) on time. However, your credit score will drop significantly if you frequently miss due dates or cannot pay your loans.

Therefore, if your credit reports show a higher credit score, banks will not hesitate to loan you. However, if the opposite is true, good luck getting loans from banks!

Typically, these are the classifications of your credit score, starting from 300:

  • 300 – 579: Poor
  • 580 – 669: Fair
  • 670 – 739: Good
  • 740 – 799: Very Good
  • 800 – 850: Exceptional

Therefore, you must ensure that your FICO credit score falls above 670!

However, after learning smart ways to boost your credit score – do you wish to start managing existing credit to ensure you repay your loans on time? Do you want to get loans in the future when you need one without hassle? I bet you do!

The 50/30/20 Rule for Managing Existing Credit Perfectly In 2024!

The 50/30/20 Rule for Managing Existing Credit Perfectly In 2024!

Now, let’s get straight to business – what are the best ways for managing existing credit in 2024?

After consulting many financial consultants and my dad, who has a high credit score, I learned the best way to manage existing credit.

The 50/30/20 rule, which I learned from Investopedia, has been one of my biggest game changers for managing existing credit.

According to this budgeting rule, you must divide your monthly earnings into three categories to profitably manage existing credit.

However, I didn’t stop after simply learning it. I had to put it into practice and see whether it would work.

Therefore, after two years, I am happy to say they do!

Now, I have a high credit score and more than enough savings for present and future needs – thanks to the 50/30/20 rule!

Therefore, if you get your paycheck at the start (or end) of every month, this is what your credit utilization ratio must look like:

50% Needs

First, you must not use more than 50% of your earnings for your basic needs that are necessary for survival. Therefore, these needs include all your daily and monthly expenses, such as: 

  • Groceries
  • Rent
  • Fuel (if you have personal transportation)
  • Transportation (public)
  • Electricity
  • Internet
  • Insurance
  • Cellular Network
  • Mortgages and Loans

I club all these expenses under “Needs” because these are necessary payments you make daily or monthly. Moreover, they are the bare minimum for your survival.

Moreover, mortgages and loans also come under need. Since managing existing credit is the primary goal, paying these dues on time is a priority.

However, please note that I did not include other necessary expenses like clothes. While clothes are necessary, you don’t buy them every day or every month. Therefore, it makes sense to include them in…

30% Wants

You must allocate 30% of your income to meeting your “wants.”

I believe in leading a happy, comfortable life. Sure, life is tough, However, not treating ourselves with something better and comforting occasionally can throw us off balance.

Therefore, these “wants” are extra payments you can make for comfort and luxury. As such, I regard these things as wants in our lives:

  • Premium clothes
  • Accessories and jewelry
  • Tickets to events (sports, music festivals, etc.)
  • The latest iPhone, iPad, and MacBook Pro
  • Super-fast internet connectivity
  • Dining out in a fancy restaurant
  • Going on a vacation

I classify these requirements as wants since I don’t need them daily, weekly, or monthly. However, I buy these occasionally to comfort myself!

However, if you save some money allocated to your wants, I recommend adding them to your…

20% Savings

Finally, you must save 20% of your monthly earnings.

Savings are a fundamental aspect of managing existing credit. Your goal must always be to maximize your savings by keeping your money in your bank account.

However, you must have an emergency savings fund to meet emergency financial requirements.

For example, if your smartphone breaks down beyond repair, you need money to buy a new one. Maybe there’s a health emergency with exorbitant medical expenses. Or maybe your house caught on fire, requiring extensive repairs?

Moreover, it would be best if you also had savings to realize your future materialistic desires. Do you wish to buy a new house and stop paying rent? Or do you want a new car, a Porsche or an Aston Martin? Start saving now so that you can buy them in the future! 

Bonus Tip: Consolidate Your Debts!

Bonus Tip Consolidate Your Debts!

However, following the 50/30/20 budgeting rule isn’t the only thing you must learn regarding managing existing credit. I have one more bonus tip for you: debt consolidation

Debt consolidation is the process of paying off all existing loans together by taking one big loan.

For example, suppose you have three loans of $2000, $3000, and $5000. If you wish to consolidate these debts, you can take one loan worth $10,000!

However, it doesn’t remove or reduce your debts. Then why do it?

I asked my dad the same question. He said:

“You do remember that you pay interest on your loans while repaying them, right? However, if you consolidate your debts, you will pay a smaller sum in interest than combining all the separate interests of previous loans!”

Therefore, debt consolidation helps lower your interest on loans – and assists in managing existing credit!

However, if you need help with debt consolidation, maybe these debt consolidation services will help!

Conclusion: Manage Your Credit to Manage Your Life!

Now that you know why managing existing credit is essential, it’s time for you to put it into action by following the 50/30/20 budgeting rule!

Therefore, follow this rule to spend your money and accrue credit wisely! Moreover, it will also help you pay off all your debts on time and have a good credit score! Thanks for reading this post! If you find my 50/30/20 practice for managing existing credit helpful, please comment below and share this post with others!

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Debamalya Mukherjee

An active fintech enthusiast, Debamalya has spent around half a decade trying to help people understand the nuances of technology and finances through his writing. Apart from being a phenomenal writer, he believes money can buy happiness - as long as you know how to use it wisely! He’s legit, out on a mission to help people earn more and spend them wisely. In fact, he believes that it is literally ‘his calling’ to become a professional tech and finance blogger for

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