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What is the 50-30-20 Budget?

Budget 

Budgeting your money can be tough, and it can be a challenge. There’s the monthly rent or
mortgage payment. Student loans, food, the car payment, utilities. You also need some money
for just plain old fun.

One relatively new rule of budgeting that has caught steam is the 50-30-20 budget, which is a
percentage-based budget.

So, what exactly is the 50-30-20 budget? The 50-30-20 budget recommends that 50% of your
monthly budget goes into “needs.”

These include things like your mortgage or rent payment, cell phone payment, cable television,
utilities such as gas, electric, groceries, car payments and student loans. Any sort of insurance
payment, whether it be car, health or life insurance.

Therefore, if your after tax monthly income is $2,500, under the 50-30-20 budget you would set
aside $1,250 for your needs.

Thirty percent of your budget goes into “wants”, such as eating out and any unnecessary
shopping. Hobbies are included here as well, such as going out to a bar with friends, or going to
the movies or a sporting event. This would also include any unnecessary subscription such as
HBO, Showtime or Netflix.

Also, though coffee is seen as a necessity by many people in America, your daily trip to
Starbucks is considered a want as well.

The final 20% of the budget goes into savings. This also includes stuff like extra car payment
and money for your emergency fund. Investing in this stock market goes into this category as
well.

If you have the flexibility, the 50-30-20 budget may work well for you. If 50-30-20 doesn’t fit, you
could certainly check out Balance, our financial fitness partner. Maybe you don’t have enough
money for savings and just need to go with 70 percent of your budget for needs and 30 for
wants. Maybe you feel you should just cut back on the “wants.”

Either way, a percentage-based budget, no matter how the percentages are allocated, can be a
fit for anyone. To get started today, sign up for one of our Savings or Club Accounts!