I’m sure you are here wondering exactly what the 50/20/30 Rule/ Budget is, but don’t worry, we’re about to get right into it!
For the longest time, the 50/20/30 Rule has been around to help people figure out exactly what percentage of their after tax pay should be spent on bills. It is a fairly simple idea that I am going to share with you today.
- 50% – Needs
- This part is for the necessities in life! You may think, this sounds like a lot, but really it isn’t. I would suggest shelter, food, transportation are all considered necessities. Shelter would obviously include utilities such as water, sewer, electricity and heat. In this section, food should only include those that are purchased at the grocery store.
- 20% – Financial Goals
- Ideally, this would include paying down debts, such as student loans and credit cards, savings for retirement as well as savings for a rainy day. In this day and age, it is suggested that you have 6 months saved for emergencies. Once that goal is met, I would suggest re-allocating those funds to paying down additional debts.
- 30% – Wants
- Now… I know there are some people wondering what is left. And I’m sure there are some people that are going to say “No way” to some of the things I am about to list as wants, but I promise you that you can live without some of this stuff! Cable, internet, cell phone, shoes/ clothes that aren’t necessary for work, fast food, MAKE UP (my biggest weakness), hair appointments (because you can learn to do your own hair), gym memberships, manicures and pedicures, decorations for you home, Starbucks, entertainment, traveling… and the list could go on, but I think you get the picture.
Interested to see the 50/20/30 Rule in effect?
To make life simple (which it never truly is), lets assume that this budget is set for a single person with an income of $50,000. And lets assume you have about $10,000 in deductions (Federal tax, State Tax, FICA, and Local Tax). So now, we have about $40,000 to work with. That leaves us with $3,333.00 for the month. For a breakdown 50% of that would be $1,667, 20% would be $666.00 and 30% would be about $1,000.00.
Needs $1,600.00
Mortgage/ Rent – $750.00
Utilities- $200.00
Car Payment- $300.00
Gas – $100.00
Food- $150.00
Car Insurance $100.00
Financial Goals $666.00
Student Loans: $250.00
Retirement: $230.00
Credit Cards: $100.00
Rainy Day: $85.00
Wants $1,000.00
Cell Phone: $100.00
Cable/ Internet: $100.00
Gym: $40.00
Personal Grooming: $150.00
Dining Out/ Fast Food: $200.00
Misc Expenses: $410.00
And there you have it folks! Of course, no one person’s budget is the same. But if you’re not for certain what to do in regards to beginning a budget, this is an excellent start. Also keep in mind that it is suggested that you should only spend 30% of your income on housing expenses.
Questions, comments? Please feel free to leave them below. Also, if any one asks, tell them Mick B told you!
astoldbymickb 