Getting Started with 50/30/20 Budgeting
The 50/30/20 budget is a popular, proportional budgeting method that helps you manage your finances by dividing your monthly income into specific categories. This straightforward approach is perfect for those new to budgeting.
Calculate Your Income
Begin with your monthly net income, which is your take-home pay after taxes and payroll deductions.
For instance, if your monthly net income is $3,000, your spending should be allocated as follows:
50%—$1,500 on needs
30%—$900 on wants
20%—$600 on savings
Define Your Categories
This budgeting plan breaks down expenses into three main categories: Needs, Wants, and Savings.
Needs are essential expenses that you cannot avoid, as neglecting them can lead to serious repercussions, such as health issues or legal troubles. Common examples of needs include:
- Housing/rent
- Basic utilities
- Food
- Clothing
- Health care
- Transportation
- Taxes
- Minimum payments
