How to ‘50/20/30’ Your Budget

The 50/20/30 rule takes the sting out of budgeting. And it doesn’t make you track every single dollar. One way to keep yourself on track is by automating the 20% savings piece: set up transfers from checking to savings.

Sort all your expenses into three categories: Essentials, Flexibles, and Saving

The 50/20/30 budget says the ideal breakdown is this:

• 50% of your money goes toward basic needs or essentials (mortgage, health care)

• 20% is for the money you can use to pay for retirement and other big life goals and dreams

• 30% goes towards flexible expenses (dinner out, travel, and vacations)

Essentials

Let’s start with the 50%. These are your bare-minimum expenses that keep the lights on in your life. Literally. Because utility bills are in this category. Along with things like:

• Rent or mortgage

• Basic groceries

• Insurance

• Gas and/or public transportation costs

• Phone and Internet

• Minimum debt payments

Savings and Dreams

Giving this part of your budget some love might feel like a sacrifice now. But ‘future you’ will be glad you did. Your 20% should include saving for emergencies, investing for retirement, and money for other life goals and dreams, like buying a home one day or going on a dream vacation...once we can travel again.

Flexibles

You can spend the last 30% of your take-home pay on those things or whatever else you want: 3D puzzles, subscription boxes for your dog. No judgments. Think of this as the ‘upgrade’ category: Groceries are a need, but ordering in is a want. Replacing your winter coat is a basic need, but extra clothes shopping falls into this bucket, too.

• Dinner out

• Travel / Vacations

• Fancy Clothes

Download the spreadsheet to help you organize!