The 50-30-20 Budget Plan

Janet was feeling overwhelmed, stressed and depressed. She had been trying to figure out her budget for weeks but nothing she tried seemed to work. No matter what she did the numbers just never added up. 

‘I can’t do this’, Janet thought as tears welled up in her eyes. ‘Maybe I’m not good enough.’

But then something inside of her told her that she could do this; that if others had done it before then so could she! It was time to pull herself together and find a way out of this mess. 

Does this sound all too familiar?

Ready to stop feeling like Janet?

Ready to pull yourself together?

I’ve been there too…and it is somewhere I never want to return. Its also the reason I created this blog… to help people like you!

So, today we are going to talk about one method of budgeting that a ALOT of people swear by and maybe you will too:

The 50-30-20 budget!

Keep reading to learn the ins and outs of this budgeting method. It is a super simple way to help you keep your finances in order.

Define the 50-30-20 budget and how it can help you save money

This method tells you exactly how much money a month you should be spending on each broad category of your budget based on how much money you bring home each month.

This helpful rule encourages you to allocate 50% of your income into necessities such as housing and food, 30% goes towards wants, (such as going out with friends), and 20% should go towards saving for the future or paying off any debt.

Going forward in persevering to pay off debt or increase savings, the 50-30-20 rule can be especially beneficial!

Lets take a look at how exactly this is all set up.

Determine your income and expenses for the month

The first thing you need to do is to determine your income and expenses for the month.

Get our a pen and paper –

• Write down your take home pay for each pay period you have in a month.
• Include any side gigs/hustle money that you receive on a regular and consistent basis. If this money is too irregular, I wouldn’t add it to your monthly income.
• Include you spouse’s monthly income if you have one.

This is your monthly income.

Now write down all of your bills/debts that you pay on a monthly basis, include the dollar amount paid.

Some categories are below to get you thinking.

• Rent/Mortgage
• Utilities
• Loans
• Car Payment
• Insurance
• Food

These are your expenses.

Create a budget allocating youR income using the 50-30-20 rule:

50% to Needs

Begin by allocating 50% of your income to necessary expenses, like rent and groceries.

These are necessities only! As in….things you cant survive without.

Necessities include :

• Food
• Rent/Mortgage
• Utilities
• Car payment and Gas (you have to get to work!)

Do not include anything that you don’t necessarily need in order to survive and/or make an income. Those will be listed under wants.

Read that section next….

30% to Wants

For this method of budgeting, you are going to set aside 30% of your take home pay for your wants.

Its huge to determine what is a want vs a need. The area where people are the most likely to overspend is in the want category.

Wants are things such as:

• Dining Out/Restaurants
• Hobbies
• Going out on the Town
• Splurge Shopping
• Gym Memberships

20% to Savings and Debt

Lastly, you will allocate 20% of you monthly take home pay to your savings and your debt.

You can always allocate more here to send more to savings. But you really want to try keep your debt repayment below 20% of your take home pay a month whenever taking on new debt.

If you are trying to pay off debt and working on a debt repayment plan….read more about that in the next section.

Expenses in this category are:

• Debt Payments
• Emergency Fund
• College Savings
• Retirement
• House Down Payment
• Vacation Savings

But your trying to pay down debt you say?

Good for you for working on becoming debt free first off!

If this is the case though, you might want to change a few of the percentages to the 50-30-20 budget so that it will align better with your goals.

If your working towards debt repayment, lower the percentages for needs to 40% and wants to 20% if you can. This would give you 40% of your income to use for debt repayment!

You can always tweak your budget as you go. When you start getting closer to your goals and debt being paid off, start to allocate more for your wants and needs!

Follow your budget closely to make sure you are on track and make adjustments as needed

Sticking to a budget can be daunting, but it is essential for achieving our financial goals.

50-30-20 budgeting is a great strategy for monitoring our day-to-day spending and long-term planning.

It helps you stay focused on saving and paying off debt so you can keep your eye on your future!

So every month make sure to follow your budget closely so that you know if you’re on track or not. Think of it as spring cleaning for your finances.

Take some time to review what’s come in and gone out over the past month, compare it to your goals, and make changes where you can.

Any money that was spent that didn’t meet your financial goals should be noted so you know where you can make better spending decisions in the future.

Establishing a clear-cut budget and actually sticking to it is a great way to stay financially secure while still having enough room to treat yourself now and then.

In the long run…this is going to build your credit and make you financially strong!

Will the 50-30-20 Budget work for me?

Lets be real….this budget is not going to work for everyone.

It will be especially challenging for really really low income people or anyone living in expensive cities like New York and Los Angeles.

The biggest challenge in these cases is finding a rent or mortgage at half or less of your take home salary.

If you land in this bucket – don’t give up on Budgeting!

Try changing those percentages a little. The 50-30-20 budget can just be a starting point and goal to reach if you may not be there just yet.

If you try and the 50-30-20 budget just isn’t right for you, there are many other methods to coming up with a budget that will work for you and your situation.

You could always give the Cash Envelope System a try!

While it may seem like a lot of work to stick to a budget, the 50-30-20 method can be helpful in bringing your spending under control.

By allocating fifty percent of your income to necessities, thirty percent to wants, and twenty percent to savings, you can make sure that you are making the most of your money.

And if you find that you need to adjust your budget as time goes on, don’t be afraid to do so – after all, your goal is to save money, not to make yourself unhappy.

So give the 50-30-20 budget a try and see how it works for you. You may be surprised at how quickly you start saving money.

Let me know in the comments what road blocks your running into with your budget? Or if there is anything you need help walking through?

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