What is The 50/30/20 Budget?
Creating a budget can often seem so complex. The more complicated it seems, the less you’re inclined to make the effort. Unfortunately, you need a budget to help keep your spending in check and to ensure progress toward your short and long-term financial goals.
If you’re new at creating a budget — or have been putting it off for fear of the math involved or messing it up because you don’t fully understand what it is you’re supposed to do — consider the simplified 50/30/20 budget instead.
Why Is the 50/30/20 Budget So Popular?
Shakespeare once said, “Brevity is the soul of wit.” It rings true today — especially when it comes to creating a budget.
The 50/30/20 budget is just that. Brief. It isn’t complicated. You don’t have to do a lot of math to figure out what money goes where. It is simplicity at its best.
How Does the 50/30/20 Budget Work?
For any budget to be effective, you must first understand how it works so you can implement the budget in your home and within the current financial frameworks of your finances, lifestyle, and family needs.
Here’s how it works.
Take your after-tax income and break it into three categories:
- 50% of your income goes to living expenses (NEEDS). This includes things like your housing, transportation, groceries, utilities, etc.
- 30% of your income goes to personal expenses (WANTS). This includes things like entertainment, subscription services, coffee runs, dining out, etc.
- 20% of your income goes to saving and/or paying down debt (SAVINGS). This can include things like building your emergency fund or paying down extra credit card debt or student loans.
Actually, it is. At least, it can be. The biggest challenge you might have in trying to make the budget work for you is: First, adjusting to new financial realities, and second, choosing which items to eliminate from your monthly spending to make the 50/30/20 budget work for you.
Getting Help With Your Budgeting Needs
Automating the process as much as possible can help you stick to your budget. If you don’t have to think about transferring – or remember to transfer the money yourself, it’s more likely to happen no matter what other things are going on in your life.
Working with the credit union gives you the personal touch that’s so often absent in larger, corporate banks. This means you’ll get help at every step of the process. From creating one or more savings accounts to setting up automated transfers from your checking account each month, there will be someone available to walk you through the process – to make sure you understand the ins and outs of your account and how it works.
Working with a budget you understand and automating the process so there’s little work involved almost guarantees your success.
Isn’t it time to give the 50/30/20 budget a try?
We’re Here to Help!
We understand the challenges of creating new accounts for saving and automating the process of moving funds from one account to the next. We’ll help you automate the process as much as possible so the money seems to magically arrive in your saving account month after month after month.
Call, chat, or stop in! We’re here to help.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.