A Great Budgeting Method For All Income Levels

Most people don’t enjoy budgeting because they find it overly complex or difficult to stick to. The reality is that most budgeting methods don’t work because they don’t account for individuality or personal variance. The method we’re about to dive into can work for just about anyone, whether you’re making minimum wage, or you’re a millionaire.

Tools Required

• Microsoft Excel (or the Mac equivalent) and a basic spreadsheet
• A checking and/or savings account in your name, preferably one with low fees and a relatively high interest rate

Now let’s get down to the breakdown of the budgeting method known as the 50/20/30 Method:

50 – Living Expenses

This number represents half (or 50%) of your income. This should be put toward living expenses, such as rent, mortgage, groceries, car payments, etc. For someone making around $50,000 per year, that comes out to close to $2,000 a month. That being said, make sure to account for taxes and deductions, as well.

With these fixed expenses, it’s not hard to predict how much money you’ll need to cover them from month to month. You’ll want to add up all these expenses in your Excel spreadsheet. Keep in mind that there’s still flexibility to use more than 50% of your income for these bills, since there’s a bit of wiggle room with this method.

20 – Money Goals

Consider what money goals you have for the year. For these, you’re going to allocate around 20% of your income. This can include investments, savings, and debt payments. If we take that same yearly income of $50,000, that leaves you around $800 per month to put towards these goals.

It’s important that these goals are realistic, and that you automate as many of them as possible. This can be done through recurring payments, deposits through your bank, or however you’ve decided to divide up that 20%. If some emergency expense does pop up, the money you’ve saved is right there for you to help save the day.

30 – Personal Spending

It can feel restricting when you start to budget. It often requires cutting spending on things you really enjoy. That’s what 30% of your income will be dedicated to with this method. You can even call it “fun” money if you want, because it’s for your enjoyment.

Taking that same $50,000 a year example, you now have $1,200 a month to spend, as you please. Hopefully that’s not all on a single purchase, but more on entertainment, eating out with friends, and even a possible vacation fund for your next big trip.

Once again, it’s good to note that it doesn’t need to be exactly 30% dedicated to personal spending, just an approximation or the amount that works best for your lifestyle.

Summary

Whatever your income level, you’re able to adopt the 50/20/30 budgeting method. As long as you start with those basic tools, and a solid level of commitment to sticking to this budget, you’ll be well on your way to a better state of financial health. Also, if you qualify for a personal account with zero fees, that’ll give you even more wiggle room in your budget and will take some of the pressure off.

Ultimately, you have the final say for where your money goes and what you put it towards. If that doesn’t always line up with the method, all you have to do is just get back on track and keep making strides forward until you’ve developed the habit of sticking to it. Once you’ve reached that point, you’ll be glad you did.