The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances
The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances

The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances The 50 30 20 Budget Formula: How to Finally Take Control of Your Finances

March 6, 2017 // career· life

It’s March — how’s everyone doing with New Year’s Resolutions? I feel like every year I make a resolution to “budget better” and pay off debt, but I haven’t really found a method that works for me… until now.

If you’re like me, money is boring and sucky and also probably kind of scary. But I’m really good at spending it. Like, too good. So I knew I had to get a handle on my finances, and I am doing so with the 50 30 20 budget formula.

It goes a little something like this:

50% of Net Income = Fixed Expenses

This category includes important stuff you need to, you know, live. Think rent, groceries, healthcare, utilities, etc. If you’re living somewhere with a high cost of living (New York, San Francisco), rent will probably take up a good chunk of this category. The goal, however, is to have at least 50% of your net income left over for the rest of your spending… the “30” and “20” of the 50 30 20 budget formula, respectively.

30% of Net Income = Lifestyle & Personal Expenses

If you’re like me, 30% may not seem like a lot for lifestyle/personal expenses, especially since this category covers shopping and dining out and exercise classes. This category is all about prioritization, really. Which is more important — a new outfit, or weekly SoulCycle? Do not be like me and try to have your cake and eat it too if you can’t afford the damn cake, people. That is how you end up in debt, which brings us to….

20% of Net Income = Future Savings & Debt Payments

Savings accounts, investments and, yes, debt payments all fall into this category. 20% is actually the minimum you should be allotting, here… if you can be more aggressive with your savings or debt payments, then do it! This category covers both short- and long-term savings, too… so your rainy day fund and vacation savings would both fall under future savings.

So what does this actually look like if you make, say, $3000 a month after taxes? It would break down like this:

  • No more than $1500/month toward fixed expenses.
  • No more than $900/month toward lifestyle expenses.
  • At least $600/month toward future savings.

Shop stylish, affordable (!) essentials to help you stay on track below, and let me know what budgeting tricks work for you in the comments!

Image: The Lovecats Inc