• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Financial Wellness

You are here: Home / Budgeting / Do You Know About The 50/20/30 Rule?

Do You Know About The 50/20/30 Rule?

September 1, 2016 by Preston Guillot

Budgeting might seem like a difficult task at first.

Budgeting may be especially daunting for individuals who have no experience with scheduled savings.

But, there are many simple ways to implement an effective budget in your life.

Do You Know About The 50/20/30 Rule?

For those new to the practice or those who have struggled in the past, the 50/20/30 rule may be extremely helpful.

By following a few simple guidelines, you will be on your way to financial bliss.

What do the numbers mean?

The 50/30/20 simplifies budgeting by giving you a flexible formula for success. 

Senator Elizabeth Warren and entrepreneur Amelia Warren Tyagi advocate this system. 

Finwell - Do you know about the 50-20-30 Rule

The graph below shows the numerical breakdown of how much of your overall budget you should spend on each category.

Breaking down budgeting into these three simple categories makes it easy for anyone to implement this rule in their daily lives.

budgeting

1. Fixed Costs

When following the 50/20/30 rule for budgeting, you set aside 50% of your overall budget for fixed costs. Finwell - Do you know about the 50-20-30 Rule (2)

Simple Tip for Scaling Back

Once you identify which of your expenses are fixed costs, you can attempt to re-evaluate your spending by cutting back on things that are unnecessary.

Doing this can help you to create an even healthier budget.

Be sure to distinguish the things you want from the things that you actually need.

2. Future and Emergency Savings

The next thing you should do to follow the 50/20/30 rule is to set aside 20% of your overall budget for savings.

These savings can then be used in the future when you retire, or if you are ever in an emergency.

 

Contributing to savings allows you to lay a strong financial foundation for your future. 

Click to tweet

These savings can also be used to pay off credit card debt.

The graph below shows the way in which credit card debt has been steadily increasing over time.

Therefore, it is extremely imperative to contribute some portion of your overall income to pay off these kinds of debts if you have them.

budgeting2

Savings accounts can also be used for future investments such as buying a home.

By allotting 20% of your overall budget for savings, you set yourself up for a productive and prosperous future.

Finwell - Do you know about the 50-20-30 Rule (3)

3. Personal Expenses

The third category is personal expenses.

Following the 50/20/30 rule, you should use 30% of your overall budget for personal expenses.

These expenses can be any extra spending that is not included in the previous two categories.

Some examples are clothing, gas, and sport or movie tickets.

Food is one expense that can become confusing.

Although food is a necessity, the amount that you spend on food changes from month to month based on where you are eating and what kinds of food you are eating.

Because the amount you spend varies, food falls within the personal expenses rather than the fixed costs category.

These are often expenses that do not have a set rate and vary by month.

Because this category is much more flexible, you need to be certain not to overspend.

Set a limit for personal expenses and be sure not to exceed it.
Finwell - Do you know about the 50-20-30 Rule (4)

How to Track the 50/20/30 budget

There are multiple ways to keep track of the amount of money you are spending.

For example, a new budgeting software called Mint, pictured below, allows you to track your budget using the 50/20/30 rule.

budgeting3

Anyone can use the 50/20/30 rule to maintain a healthy budget no matter your age or income.

Knowing how much you are spending and what you are spending it on gives you financial freedom.

The simplicity of the 50/20/30 system allows you to streamline the budgeting process and save successfully.

Although budgeting might seem complicated at first, with this straightforward system you will become a master in no time.

Filed Under: Budgeting

Previous article: 6 Ways To Study Abroad On A Budget
Next Post: Managing Your Finances With Budgeting Apps

Primary Sidebar

Follow Us







RECENT ARTICLES

  • What is Chapter 11 Bankruptcy and How it May Protect BusinessesWhat is Chapter 11 Bankruptcy and How May It Protect Businesses?
    Chapter 11 bankruptcy isn’t uncommon, yet many fail to see its purpose. Most people have heard of Chapter 11 vs Chapter 7 liquidation, or even [...]
  • Personal Loans After Bankruptcy Discharge: Is This Possible?Personal Loans After Bankruptcy Discharge: Is This Possible?
    Applying for personal loans after a bankruptcy discharge? Getting approved may not be easy, but it still is possible. It will definitely require [...]
  • How to Stop A Student Loan Wage GarnishmentHow to Stop A Student Loan Wage Garnishment
    Student loan wage garnishment is the last thing you want to experience while paying student debts. Monthly wage deductions could ruin your spending [...]
  • Don’t Miss These Posts On Financial Wellness..
    Here’s what happened on Financial Wellness 1. How to Start Investing in Stocks Even With Debt If you’re in debt, then you might be afraid [...]
  • Credit Repair Credit Cards: Learn to Rebuild Your CreditCredit Repair Credit Cards: Learn to Rebuild Your Credit
    Trashing your credit score is so much easier than building a solid credit rating. It’s no wonder so many people seek out credit repair credit [...]
Instagram did not return a 200.

Connect With Us On Instagram!

Footer

Financial Wellness

© 2021
FinancialWellness.org
All rights reserved

  • Privacy Policy
  • Terms and Conditions
  • Contact Us

This Copyrighted Material may not be republished without express permission. The information presented here is for general educational purposes only. Material Connection Disclosure: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to/from this page and may receive commissions from purchases you make on subsequent websites. You should not rely solely on information contained on this page to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.

FOLLOW US

  • Facebook
  • Twitter
  • Instagram