Budgets

50/30/20 Rule

The 50/30/20 rule is a basic guideline to live by and a perfect place to start when thinking about your budget.

Basically, it says spend 50% of your total income on your needs, 30% on your wants, and 20% on your financial goals. (If you are somehow confused please refer above to my beautiful excel graph).

What constitutes as a need? Well anything that requires you or your loved ones to be undead: food, utilities, housing, animal expenses, gas etc. Also, anything that you need to pay every month: car payment, student loan payment, etc.

What is a want? Anything your little heart desires that makes your undeadness fun. Netflix subscriptions, gym memberships, eating out, amazon spending budget, etc.

What are your financial goals? This includes anything that allows your undead self to be financial free at some point: your savings, paying off your credit card debt, or paying extra on a student loan.

Note: say for instance, your minimum payment is $95/month on your student loan, but you pay $250/month to help pay it down faster. The $95 would go into the needs category and $155 would go into your financial goals.

Play around with the percentages that works best for you. For example: if you live in an area with super cheap rent maybe you only need 40% of your money towards your needs and that extra 10% can be split between wants and goals.

Also, it is important to note that some things that are a “need” can also be a want if they are in excess of what you actually need to be alive. Forrrr exampleeee, gas is a need, however, you don’t need to drive to the beach every weekend. That extra money you are spending on the extra driving should be taken into consideration and added as a “fun trips gas money”. One example on my personal budget is I have a “recipe food” section in my wants portion of my budget. Because food is a necessity but making new recipes just to try them isn’t.

Right now my split is 54.70% on needs, 22.53% wants, and 20.03% on financial goals. My needs category is higher then it theoretically should be but I happen to be a crazy animal lady so I have quite a few mouths to feed. The 50/30/20 rule is a guideline, but I would suggest if you are trying to set yourself for financial freedom at least prioritize 20% on your financial goals.