Creating a budget can be overwhelming! So much so that you just don’t ever do it…you just play it by ear, month by month, without any sort of plan at all! 50/30/20. Simple as that. 50/30/20. I really like to keep things simple. The K.I.S.S. method - Keep it Simple Sunshine!
The 50/30/20 plan can help you to access your budget and see if you are keeping on track with your goals. Or, help you to work towards your goals! By keeping it simple and putting your money into three separate pots instead of breaking it down into endless categories, you can more easily stay on track.
FIXED COSTS:
These are bills that don’t vary much month to month. Rent, mortgage, insurance, utilities, even gym memberships, anything you are committed to paying on a monthly basis. Keep your fixed costs to no more than 50% of your income.
FLEXIBLE SPENDING:
No more than 30 % of your income goes to flexible spending items. This includes groceries, gas, hobbies, eating out and entertainment spending; all the costs that fluctuate from month to month. Food is included in this part of the budget because it can vary depending on how much you eat out!
FINANCIAL GOALS:
These goals can be paying down credit, contributing to an IRA and emergency fund, saving into a college fund for children (but not after maxing out your IRA!!!). 20% of your income should go to saving for these goals.
A RETIREMENT NOTE:
Notice that the 50/30/20 plan is your take-home pay, net after all deductions have been made at work. So, if you are contributing to a work related retirement plan, such as a 401(K) or 403(B) then you are contributing more toward your financial goals. Not such a bad plan. Keep that money out of site and out of mind!
Remember that staying on a budget takes a little time and commitment. If I can help you plan, give me a call and I’ll walk you through it.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.