Budgeting

50/20/30 Rule for Budgeting Your Money

Budgeting can be very scary and overwhelming for a lot of people believe me you are not alone. Thanks to Senator Elizabeth Warren and her daughter Amelia Warren Tyagi for their book All Your Worth: The Ultimate Lifetime Money Plan. This book made the 50/20/30 rule for budgeting your money a very popular method.

Explaining the 50/20/30 rule and much more in the book. Their book has sold millions of copies since it was release in 2012.

50/20/30 Rule

What is it

The 50/20/30 rule is a way to budget your money by separating it into 3 sections after taxes are taking out. 50% of your check after taxes should go to your needs. 20% of it should go towards your saving and finally 30% should go to wants.

50% Needs

By needs I mean bills, important necessary bills. Some Examples of NEEDS are:

  • Utility bills
  • Health Insurance
  • House note/Rent
  • Car payments & insurance
  • Groceries
  •  Things like that

However Netflix, cable, etc those things are wants not needs. A Need is something that you cant really live without. You need lights, a car, food, etc. Those are all NEEDS.

20% Saving

Put 20% of your money away. Split it up put some in your saving account, some towards retirement and etc.

A little tip try and have at least 6 months worth of your bill money saved up. You never know when something will happen and you always want to be prepared no matter what..

30% Wants

This is where your wants come in. This is more for your entertainment purposes.

  • Netflix
  • Going out
  • Movies
  • Cable
  • Internet
  • etc
50/30/20 Rule Money

Example

This is a quick example. After taxes you have $2,500 for the month go ahead and take 50% out for your needs (House note/rent, utilities, etc). So you are left with $1250 for your wants and saving. You take 30% out of the $1,250 for your wants (going out, Netflix, etc) which gives you $875 to spend. Finally you are left with 20% which is $375 to go towards saving.

That’s just one example everyone’s story is different. Maybe you have high rent, see if you can find somewhere cheaper. Maybe instead of 30% going towards your wants make it 20% and add that other 10% to your needs. Play with it adjust it to see what works for you. What works for soe may not work for others.

If you tried this method please leave a comment and let us know how it worked for you

The 50/20/30 Rule didn’t work for you? Try the Envelope Budgeting System out. Or try Saving Money Using Dimes.

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