The 50/30/20 Budget

The 50/30/20 Budget is a simple way to ensure your money goes where it needs to. It doesn’t require you to keep meticulous records of where your money goes. It allows for what I like to think of as a “drag and drop” budget. The breakdown is as follows:

50% - Needs – This is anything you have to have: a place to live, food to eat, a way to get to work, etc. This includes things like utilities, insurance, internet, and debt minimum payments.

30% - Wants – Things you want to have. This is things like eating out, subscriptions for things like Netflix, hobby purchases, and any nonessential shopping.

20% - Savings and Debt Repayment – This includes saving for the future and paying off current debts.

What does that mean for your actual budget? Let's break it down. In this example, we are going to look at a married, active duty, in over 3 years, E-3, who lives on base/post. That is a base pay of $3,198 gross. This does not include any BAS or additional allowances. Given that they live on base housing is covered by the military and has no additional cost. The rest of the breakdown is as follows:

Needs: $1,599

Wants: $959.40

Savings/debt: $639.60

If, for example, this family had a car payment of $750 per month, that would need to come out of needs or debt. The car payment is over the debt amount allowed, but is a need to get to work every day, so it can fall into either or both. Things like Netflix are easier to put into 1 category. You don’t need Netflix; there are plenty of free ways to watch TV, but if you want it with no commercials, or love to binge-watch (like me), it is worth the $14.99 per month. Putting money into the TSP would come under savings. Putting 20% into the TSP is great for the future, but means that all of the car payment has to come from the money for needs, leaving less for groceries, internet, and utilities.

It may be easier for you to budget with specific items taken out. Going back to the example of the car payment, if we work the budget after the car payment has been accounted for, it makes it a little easier. The $3,198 monthly income becomes $2,448 after the car payment comes out. Now the monthly budget looks like this:

Needs: $1,224

Wants: $734.40

Savings $489.60

Looking at it this way may help you to see where you have money available for other things. This shows you have $306 per week for your needs and $183.60 for your wants. That could make your budgeting easier.

The best budget is the one you will use. Maybe this one is a good budget for you?