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In this series, we will go over a few different types of budgets and problem they are trying to solve. If you are following along in this series please review the following budget:

  1. Zero-Line

The next budget we are going to cover is 50/30/20 budget. This budget is a bit more traditional but it also presents some simple key concepts.
These key concepts are:
50% – Needs
30% – Wants
20% – Savings

For example.

ExpensesCostBudgetTotal left
Rent$20040%300
Food$10020%200
Utilites$5010%150
Transportation$5010%100
Savings10020%0

50/30/20 in this case we allocate our budget based on percentage. We have removed wants and focused the budget on needs which consists of Rent/Food/Utilities/Transportation. Then we have savings which is defined as emergency fund/IRA.

Aspects of 50/30/20 budget that often go neglected.

Wants may not be properly defined
One-Time annual expenses
Seasonal expenses
Accounting for pulling from savings
Why are these important to mention?

Mentioning these is important because of consideration of whether having to dip into savings in order to cover an expense. With that said if you like a bit more flexibility in your budget then 50/30/20 is for you.

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Categories: Budgeting