The 50/30/20 budgeting rule is making the rounds on the internet and I honestly wasn’t sure what it was until I read up on it. I haven’t had an official budget in over 20 years and that’s largely because I have always paid myself first. For decades, I’ve always tried to maximize my 401k, kept a cash reserve fund of 6 months salary ($100k) and kept very little debt so I wanted to find out if 50/30/20 could help me in some way. When I was in my 20’s, I did struggle quite a bit with money but that poverty helped provide clarity and forced me to improve to a point where money isn’t much of a worry any more. If I had known about the 50/30/20 back then I might have used it.
50 – Needs
The 50 percent of your budget is supposed to be for your needs. I would assume that I’ve documented that well enough here when discussing the true cost of home ownership. In that post I wrote about how home ownership costs about $1400/month but that number is likely up to $1600/month this year given inflation. I know my electricity cost went way up this year.
My food expenditures vary greatly so I don’t really have a “food” budget. Since I started my Zepbound health journey, I know my grocery bill has gone down by at least 25 percent.
30 – Wants
The 30 percent of your budget is supposed to be for your wants. I am mostly past the point in my life where I want “things” and I would much rather have “experiences.” Truth be told, I have a house full of stuff and it serves as a financial regret in my life which I wrote about here.
To that end, most of our disposable income goes to trips. We have several trips both domestic and international planned for later this year. We will be visiting a new country this year, Norway, and we try to visit at least one or two each year. The budget for that trip is at $20,000.
20 – Savings
The 20 percent of your budget is supposed to be for your savings and paying down debt. I have very little debt and the debt I do carry is at 0% or less than 5% including the mortgage on our rental real estate so it makes no sense to pay it off given I earn over 5% in short term T-bills right now.
Share The Wealth
Are you using the 50/30/20 rule and is it working? Leave a comment below to share the wealth….