A budget is an important tool to help you manage your money. It can be used by individuals and families of all ages to help reduce debt and get on the right track toward financial security. It must be designed to work for you, so it’s important to keep some key factors in mind when setting one up.
No one likes doing a budget, but it simplifies your financial life so you can be intentional with your money. Most of the time, you have no idea how your money is being spent, or what you’d like it to be used for. A budget can help us easily see where we’re spending our money and helps us to make the best choices.
Cutting costs is always the key to being able to save money. When you have a budget you know exactly where your money goes, what you are spending, and you know exactly how much you have left over. Planning your budget allows you to stay within your means and stick to your budget. I’ve made a budget spreadsheet that you can print out and begin to reduce your spending.Spread the love
How to keep your finances under control with the 50-30-20 budget rule (with worksheets, printouts and examples)
Everyone wants to save money. If not, you should. Although the notion of saving on the priority spectrum varies from person to person, it is an integral part of being a responsible adult. Believe it or not, one of the first steps to saving money is to create a budget. One of the best budgeting methods is the 50-30-20 budget rule. If you want to know more about how to budget using the 50 30 20 method, stay tuned here. I have some great resources for you! The truth is that saving and financial security are topics that require special attention. This is different for everyone and depends on their specific income and desired standard of living. If you settle for $10 a month and live in a cardboard box with a bed and bathroom under the freeway, who am I to judge. Likewise, you can make millions but be absolutely miserable because your billionaire boyfriend has a better private jet than you. Ultimately, you need to work towards your financial goals, security and savings. Whether you like it or not, you need that money now and you will need it tomorrow. Just like your grandmother used to hide a stash under her mattress for rainy days, you should too. Whatever your financial goals are, you need to have a plan. This plan is called a budget. As we continue to explore this issue, we must ask ourselves: Where do I start? The 50-30-20 budget guide is a rule of thumb that helps you divide your income and allocate what goes where. Basically, this is a good rule of thumb to follow regardless of your income level (whether you make a lot of money or are just trying to make ends meet). Consider your net income as a pie. This is your salary after taxes, pensions and direct deductions. Whatever type of cake you want, whatever size, whether it’s with or without whipped cream, this is the cake to have. 50% of this cake is used for survival, 30% for recovery and 20% is saved for the future. In fact… 50% for needs, 30% for wants and 20% for savings! The 50-30-20 guide is a solid plan and a good starting point to help you manage your money. Let’s look at each category in more detail. This article may contain affiliate links. For more information, see our complete information.
50 30 20 Household categories
1. REQUIRED- 50%
The government is happy because your taxes have been paid. Your normal pension contributions will be respected. Your salary is in your hands. It’s time to burn the bastard! (If this made you laugh, read on. If it enticed you and you’re willing to spend money, then you really should keep reading and maybe you should make this blog your default screen. haha). Half of your salary must be used to meet your needs. These are the costs associated with :
- Lease/mortgage/housing contract
- Transport/car expenses
- Sickness/life insurance
- Power supply
- Loan (minimum payment)
Your budget should be set so that all expenses do not exceed 50% of your income. Therefore, the cost of furnishing an apartment, as well as the cost of transportation, food, etc., should not exceed half of your salary. If even one of these is above 50%, it falls into the desired category and is probably a luxury that should be re-evaluated. A detailed budget should be prepared with dollar amounts for your needs. Only then can a proper assessment be made to ensure that they are below the general 50% distribution. For example, if your shopping list consists of fresh lobsters combined with the finest steaks from hand-fed cattle raised by blind Tibetan nuns, and you are struggling to save money, then you need to rethink your needs! Credit, whether it’s a mortgage, a car loan or a credit card (with a mandatory minimum payment), comes under the heading of indigence.
FAQ – What if my rent is more than 50% of my income?
If your rent (or other basic needs) makes up more than 50% of your income, you have two options. You can look for a cheaper place to live or find ways to increase your income. Find a second (or third) job. Find ways to make more money online or run a side business in your spare time.
2. WILL BE – 30%
Remember, you have to spend a little to save a lot. To save money, treat yourself once in a while. Set aside 30% of your budget to enjoy life. You work hard, you succeed, you get the job done. …. HAVE FUN! The only way to keep working hard is to encourage yourself regularly. Basically, your requirements are as follows:
- Recreational expenditure
- Recreational sports
Again, these categories should be looked at in a detailed budget breakdown to ensure that together they do not account for more than 30% of your household income. Don’t be afraid to buy the clothes you like. Take the vacation you’ve always wanted. Make yourself a nice dinner. Go to a spa. Take care of yourself. As long as you stick to your budget! If you love outdoor sports, but golf equipment is out of your budget, play tennis or soccer. Just because you like kayaking doesn’t mean you should buy it. Think about it. Have fun without getting shot. Be responsible in the WANT category, because it’s an easy way to lose control. This is a mathematical formula to calculate how cranky you can be for good reason. Don’t cross the borders of Mischief City and stay away from Tupicville. They share a narrow border.
FAQ – Which category does the charity fall under?
We usually do charity work just because we feel like it and enjoy it. Neither can be attributed to necessity , nor to necessity. This means that the charity falls into category wants . And you should only do this if you have room for it in your 30% limit. If not, you need to prioritize. Perhaps you decide to forgo a day of shopping or a mini vacation and instead make a donation to charity.
3. SAVINGS (and debt repayments) – 20%
First: If you have a credit card balance, the required minimum payment is considered a requirement. Once you have determined that number, you need to decide how much of your last 20% of income you are willing to spend on getting rid of debt. Additional payments on credit cards in excess of the minimum payment will fall into this category. Anything left over is put aside as savings. Any debt repayment in excess of the minimum required in each case will be considered an allowable deduction in the Savings and Debt Repayment category. This category is your investment in the future. This is the icing on the cake for you and your cash reserve if you ever find yourself in a difficult situation. Since debt reduction is an investment in your future, along with savings, it should account for 20% of your income. In this category, you would also save for a down payment on a house/car or to build an emergency fund. Did you know that you must have an emergency fund of at least $1,000? According to an Associated Press-NORC Center for Public Affairs Research poll, two-thirds of U.S. citizens would have trouble with a $1,000 crisis! What about you?
Use of the budget line 50 30 20 – step by step explanation
Now that you know what belongs where, you’re ready to go. Follow this simple step-by-step approach and you’ll have your 50 30 20 budget in no time!
Step 1. Decide how you are going to control your budget and finances
There are several ways to keep track of your budget, and you should choose the one that best suits your needs and preferences. Printed material is a great way to start working on a budget. Personally, I love prints because I’m a paper and pencil girl and I love colors, stickers, washi tape and everything else. Printable spreadsheets offer a creative way to organize your finances. If you like diaries and binders, the printouts allow you to easily add and remove pages as needed. Why don’t you take my printable budget pack to get you started? It’s completely free!
Spreadsheets (Google Sheets or Excel spreadsheet)
A budget spreadsheet template (both in Google Sheets and Excel) is another great way to analyze, organize and track your budget. This method is best suited for those who don’t like to keep books and paper. If you want to keep all your information on your phone or computer, this may be the best method for you! You can use this free 50 30 20 rule card to get started. If you like to keep a journal, why not use it to keep track of your budget? Let your creativity run wild and have fun! This is another method that is perfect for those who like to store information on their phone. Some applications can be linked to your bank accounts, making it much easier to pay bills, etc.
Step 2. Record your total income for the house
Once you have chosen the budgeting method that works best for you, you need to record your total net income. This is your income after taxes. Your total household income should include all additional income, gifts, etc. It represents your whole pie.
Step 3. Calculate your needs, wants and savings Budget amounts
Now that you know your total household income, you need to calculate how much you can spend on each category. Remember that 50% are needs, 30% are wants and 20% are savings.
Calculation of requirements
The formula to calculate requires : 0,5 x INCOME
How to calculate wishes
The formula for calculating is : 0,3 x INCOME
The formula for calculating savings is as follows: 0,2 x INCOME
Examples of the calculation of each category for the budget 50 30 20
Let’s assume Jane’s annual salary is $30,000 a year. Let’s set a 50-30-20 budget for them. Jane’s monthly income: $30,000 ÷ 12 = $2,500 Amount of requirement: 0.5 × 2,500 = $1,250 Amount to be declared: 0.3 × 2500 = $750 Amount to be stored: 0.2 × 2500 = $500
For example 2, assume that Jack’s salary is $60,000 per year and his budget is $50,30 20. Jacks monthly income: $60,000 ÷ 12 = $5,000 Amount of requirement: 0.5 × $5,000 = $2,500 Amount to be declared: 0.3 × $5,000 = $1,500 Amount to be stored: 0.2 × $5,000 = $1,000
For our last example, let’s assume Mary receives $165,897 per year after all deductions. Let’s use some more complicated numbers. Maria’s monthly income: $165,897 ÷12 = $13,824.75 Amount required: 0.5 × $13,824.75 = $6,912.375 (but this amount must be rounded up) → $6,912.38 Amount for wishes: 0.3 × $13,824.75 = $4,147.425 (again, this amount is rounded up) → $4,147.43. Amount for savings: 0.2 × $13,824.75 = $2,764.95 (does not need to be rounded because it already has 2 decimal places) If the numbers need to be rounded, you may miss a penny or two when adding up the totals. For example, if you add the totals, you find : 6,912.38 + $4,147.43 + $2,764.95 = $13,824.76, ONE HUNDRED more than her monthly income of $13,824.75. If you’re planning down to the last cent, take it from one of the categories. That means you can give $6,912.37 to NEEDS. You know what I mean? I know. That’s a lot of math. Remember, you can enter your numbers into the free spreadsheet above and it will be done for you! But it’s still great to understand math!
Step 4. Record your expenditure for each category
Once you’ve determined how much you can allocate to each category, you can now write down all your monthly expenses. Focus first on all your expenses that fall into the NEED category, then DESIRE, then SAVE. Make sure the total amount for each category does not exceed the maximum amount assigned in step 3 above. Let’s see what a typical 50, 30 and 20 year budget might look like. Then break down example 2 above. Please note that summer vacation is HOT and $500 has been set aside for that. In addition, $250 was allocated to a retirement in the SAVINGS section. Financial experts recommend that you allocate 10-20% of your savings to retirement. In this example, 20% of $1,000 is $200, and we invest that amount in a 401(k) plan. We also allocated 5% of our savings ($50) to the Roth IRA. Debt repayment through savings essentially refers to anything more than the minimum payments (which refer to the NEEDS). This way Jack can work on getting rid of his debts as soon as possible.
FAQ – What if I have extra money in my category? Where to?
You decide! Let’s say you have $100 left over after all your spending in the Needs item. You can do whatever you want with it! You can use it for a summer vacation, a retirement fund, an emergency fund, or a snowball for debt repayment. All kinds of things.
Step 5. Target
You have a budget. This is a good time to set all your financial goals. Saving for a house? You may want to temporarily allocate more money to her. Are you trying to lay the groundwork for your child’s college education? Write it down!
Step 6. Evaluate each category
Now that you have also set your goals, you can review and evaluate each category and make adjustments as necessary. These will change from time to time depending on the financial goals you are trying to achieve at different times in your life. In a year’s time, for example, you’ll need more money to put a down payment on a house. And in another year, you might be saving for the birth of your child. In general, not much will change in your EMERGENCY budget unless you move or pay off loans.
Step 7. Staying on course
Stay on track by staying within the budget for each category and tracking your progress using the method you chose in step 1 above. If you must, find a colleague. Understand that none of this will work if you don’t stick to your budget!
Related articles on budgeting and the 50-30-20 rule:
How to start budgeting in 7 easy steps A comprehensive guide to zero-based budgeting How to stay within budget with the financial envelope system 7 best budget planners to master money management
Final thoughts on the 50-30-20 budget line
Now that you have a good foundation for creating a budget, you can begin to create a savings plan. The goal is to analyze each category and ensure that your expenses are within the allocated range. Don’t cheat! Are you already using the 50-30-20 budgeting method? Do you have any other tips or questions? Share it with us in the comments below. I’d love to hear from you! Do you like this job? Safe!
50 30 20 Budget with examples (budget table and free print templates)
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440 ActionsBeing in control of your money is an important aspect to any financial success. I don’t believe in living within your means. I believe you should live as extravagantly as you can while staying within your budget. I’ve started a series of posts on my blog “Stash-the-Cash” where I will provide you with a template for a budget that you can use for planning your financial goals.. Read more about monthly budget planner excel and let us know what you think.
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