50/30/20 Budgeting
50/30/20 Budgeting
By Erica Zaragoza
What is Budgeting?
A household budget is a spending plan that helps you determine where your money should go each month. There are many different ways to set up your budget but oftentimes simplicity is best.
The budgeting rule I like to start with is the 50, 30, 20 rule. 50% of your income goes towards your needs, 30% goes towards your wants and 20% goes towards your savings and debt repayment goals. It's that simple 50, 30, 20.
How do I Build a Budget?
First total your income from all sources. The first 50% of your income goes towards the things you need to survive. The kinds of things included here are housing, transportation, food, utilities, healthcare and child care if you have children. Pretty simple and straightforward.
The next 30% of your budget is the fun part! 30% of your budget goes towards your wants. If you want to purchase organic fruits and vegetables or dine out at restaurants or maybe even splurge on a latte from the local coffee shop you love, you can! The choice is yours. These wants fall within 30% of your budget.
The last part of your budget is the 20% that goes towards savings and debt repayment. This part of your budget will focus on things like paying down debt, saving for a rainy day, and saving for retirement.
The simpler you can keep your budget the easier it will be to stay committed and ultimately be successful.
Do I need to Track my Budget Every Month?
Start by tracking your income and expenses. Then, set your intention to practice the 50/30/20 rules for the month. After the month is over, track your progress and adjust any expenses that did not fall within the 50, 30, 20 rule. You might need to track and practice for the next few months but the more you practice the easier it will become. Soon you will have a successful budget month after month without even thinking about it and that’s how you do the 50, 30, 20 budget.
What if I still have questions on Budgeting?
Every person and household is different so building a budget is a fluid and flexible task. If you have a lot of changing variables and would like more guidance or information contact us!