Have you ever sat down to start your budget, but the whole process seems overwhelming. Where do you even start?
If so, you are not alone. Getting a handle on your finances can feel frustrating.
But, today, I am excited to share with you an easy way to divide up your finances to make the process feel simple and get it done fast!
Say hello to the 50/30/20 budget rule!
What is the 50/30/20 budget rule?
The 50-30-20 budget rule helps you manage your money by dividing your paycheck into three major categories.
Those categories are Needs, Wants and Savings.
50% of your income is dedicated to your Needs.
50% = Needs
This involves the spending that is necessary for daily living.
This section of the budget would include things like mortgage, utilities, groceries and all other mandatory-must-have-it-to-survive expenses.
30% of your income is dedicated to your “Wants”.
30% = Wants
Your wants would include expenses like entertainment, travel, subscription services, personal spending money and the like.
It is important, when using this budget method, to really take a hard look at your needs versus wants. Doing so can really help you be successful using this budget.
Finally, 20% of your income should go towards savings and debt.
20% = Savings/Debt
You could put money towards particular savings goals or sinking funds, retirement, investments or any other financial goal. If you are trying to become debt free, you can also use this money to make extra debt payments.
50/30/20 Budget Example
Curious to see how this budgeting method looks in real life? Let’s check out an example.
This real life budget example was made using worksheet we created, specifically to help you make a 50/30/20 budget for yourself.
In this example, the family has $4000 a month in total income to work with.
In the Needs section, they can use $3000 for their monthly expenses and spending.
All the needs for this family are met with this amount.
In the Wants section, they have $1200 allocated.
Check out how how they used that money below.
In the final section for Savings, they have $800 to use.
You can see what they are saving for below.
Note: You CAN also use the “savings” money to put extra toward debt payment, retirement investing, college accounts or any other big financial goal.
50 30 20 Budget Tools
Creating a 50/30/20 budget isn’t too complicated, but having some tools to use will make it even easier, and help you stay organized.
50 30 20 Budget worksheet
As mentioned above, we designed a printable worksheet that is fun and easy to use, to help you create a 50-30-20 budget for your income.
The worksheet walks you through creating a budget using the 50-30-20 budget rule so that you can start budgeting right away.
Using the form is pretty straightforward.
In the Income section, enter the source of your income, how much you will receive and add up the total from all jobs.
Second, move onto the needs section. Calculate what 50% of your income is.
Enter this amount on the line. Then fill in your expenses and the amounts for each in the table.
Add them up at the bottom.
Next, fill in the Wants section.
Calculate how much will go to the Wants section and fill in the expenses and amounts for each in the table.
Finally fill in the Savings section, as you did the previous two sections, with 20% of your income.
Along the way you will calculate if there is any money “leftover” in each section.
If so, you can use that money to save more, payoff debt, cover other needed expenses or do something fun with it.
Also included is a section to write your money goals for the month, to help you stay focused with your budget and dreams.
We love this printable and how easy it is to use for your budgeting plans.
It will really help you get started with a budget and deciding where your money should go.
50/30/20 Budget Spreadsheet
And, if paper and pen are not your style, we also have a budget spreadsheet, specifically designed for the 50/30/20 budget.
With this spreadsheet you just put in your paycheck amount, and the math is all done for you!
Then you add in all your Needs, Wants, and Savings, etc and the spreadsheet will let you know if you are over or under for each percentage.
It even comes with an expense tracking sheet you can see how your real spending compares to your planned expenditures.
You can check out the 50/30/20 spreadsheet here.
Time to use the 50/30/20 Budget Method
Okay! You have seen how the 50/30/20 budget method works, and we have shown you some tools you can use to help you get started.
We really like how simple this budget process is, and that it can work for so many different budgets and circumstances.
If you think the 50/30/20 budget would work for you, give it a shot!
Use our worksheet or spreadsheet to get started and see how it goes.
What do you have to lose?!
If you want to explore some other budgeting methods, check out all of our Budget Worksheets and Budget Spreadsheets!
Have questions? Leave a comment and let me know. I am happy to answer!