1. Calculate Take Home Income
In order to start any budget, one must calculate his or her take-home pay. You can do this by looking at your old check stubs or if you didn’t keep them around, look at your bank deposits. If all else fails, wait until you get paid and calculate this amount times 4 if you are paid weekly or times two if you are paid bi-weekly.
Once you have this amount, you are ready to start planning your 30-30-30-10 budget.
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2. Create Financial Goals
What are your financial goals? Here are some financial goals examples to help you get started:
#1 Financial Goal – Pay off debt
If you have debt, make sure to include a debt repayment plan. I like the debt-snow ball method where you pay off your smallest debt first to gain a sense of accomplishment. Once you have paid down your first debt, use that extra money to pay down your next debt and so on, until you are debt-free.
#2 Financial Goal -Set aside money for your retirement
It is best to start saving for retirement early. If you start in your twenties you can build a nest egg taking full advantage of compound interest. Check with your HR department and see if your company offers a retirement plan and if not, open up a ROTH IRA yourself.
#3 Financial Goal – Try your hand at investing
You can start small with apps such as Acorns or M1 finance. If you are just learning these are good ways to get your feet wet without investing a lot. Try researching some companies and pick a few to invest in.
When you set a goal, make sure it is clear and measurable. Here are some examples of financial goals you can copy:
- I will pay off $2000 worth of debt, by December 2021.
- I will add 10% of my pay biweekly to a retirement account.
These are measurable and obtainable. If you plan to pay down debt, calculate how much you will need to put towards your debt every month.
As you create your financial goals, think of monthly and yearly goals. Also, include a five-year money plan. Be sure to check back each month and at the end of every year to see if you are on target to reach your financial goals.
3. Write Down Spending
Often we spend without thinking too much about it, but if you start tracking your spending, it can be a real eye-opener. Many times we don’t realize the little purchases add up over the month and when we get the credit card bill, it is WAY more than expected.
This can throw off any budget.
Once you start tracking your spending, you can keep a tighter grip on your budget. You will know how much you spend on “extras” and perhaps start cutting back on some of the “wants” until you have reached your budget goals.
If you are looking to save money, you can take a look at this post listing 75 Frugal Living Tips to help you save more.
4. Divide Your Take Home Pay
Once you have a clear number to work with, divide spending up according to the 30-30-30-10 budget rule percentages.
5. Use Sinking Funds or Cash Envelope
In order to keep track of where your money is going, consider setting up sinking funds with your bank. You can learn more about sinking funds here. Another popular method is the cash envelope system. This works for household expenses such as groceries and gas, yet I find since many of us pay bills online, sinking funds are more useful for mortgage and utility payments.
What If My Income and Expenses Don’t Match The 30-30-30-10 Budget?
You really have two options if your monthly expenses don’t match this budget:
- Try another method such as the 50-30-20 or another type of budget found in this post: How to Find the Perfect Budget for You.
- Find a side hustle so you can amplify your income. You can check out 75 side hustle in this post.
In fact, if you are in debt and you want to pay your debt quickly, a side hustle may be just what you need. You can also try the debt snowball repayment method found in this post.
How Can I Save More?
Saving more is a great idea and can be included in your financial goals. If you want to amp up your savings, try frugal living to cut costs on most things. I recommend keeping expenses that are really important to you and things you really love. For example, I like clothing and fashion. I don’t go crazy, but I do buy clothing each month because it is something I enjoy. However, I have learned to cut back on other areas, such as making my own lunch and coffee at home and only eating out once or twice per month then meal planning for the rest of my meals. It works for me!
Who Should Not Use the 30-30-30-10 Budget?
You should not use the 30-30-30-10 budget if you have a high mortgage or rent payment. Yet, downsizing is something to consider if your housing is taking up over 50% of your budget. You may be “house poor” and living somewhere you cannot afford.
Also, if you find this budget very confining, you may want to check out the 80-20 budget rule (explained below), which is less confining but may also promote overspending.
I always advise my readers to find something that works for them and stick with it. So if this budget isn’t your thing, find another financial plan that goes with your money mindset. Our goal is to live an amazing debt-free life and save for retirement. Our budget can help stop overspending and keep us on track to reaching our financial goals.
Other Popular Budgeting Ideas
If this budget isn’t your thing, the great news is there are many other budget ideas to choose from. Here are some brief descriptions of other budgets you can choose from:
Traditional Budget
This is my personal favorite. Simply figure out your “take-home” pay and subtract your spending. I was paid on salary so I had my employer take out a percentage for retirement, tax-free. I was able to save for my wedding and my husband and I are currently debt-free as we have paid off our mortgage and cars.
Zero-Sum Budget
A zero-sum budget assigns a category to every penny you make. In this type of budget, your income minus your expenses should equal zero, hence the name “zero-sum” budget.
One pro of the zero-sum budget is it help you be more intentional with your money and treats everything as if you are paying a bill including charitable donations, entertainment, and savings so you know exactly where your money is going instead of leaving things to chance. One con is that you need to determine where to put every single penny you make.
50-30-20 Budget
Made popular by Elizabeth Warren – Harvard Bankruptcy Expert and U.S. Senator from Massachusetts, the 50/30/20 budget divides your money up into spending categories. Warren coined the term “50/30/20” while helping teach her daughter, Amelia Warren Tyagi, about money and they co-wrote the book “All Your Worth: The Ultimate Lifetime Money Plan.”
In short, like the 30-30-30-10 budget, you are assigned your money to categories as follows:
50% – Needs (Food, Housing, Utilities, Transportation, Insurance)
30% – Wants (Shopping, Eating Out, Hobbies, Gym)
20% – Savings
As you can see, the categories are just grouped differently. The main purpose of any budget is to track expenses, pay bills, and avoid overspending.
80-20 Budget
This is similar to the 50/30/20 however in this type of budget, you will allocate 20% of your money towards savings and everything else is fair game. This budget is helpful for people that do not want to feel confined by a budget and since you are already saving 20%, you will feel more confident in spending. However, I suggest still making a plan to cover bills and not to go too crazy with spending, especially if you are in debt and working on paying it down.
30-30-30-10 Budget Rule Final Thoughts…
Keep in mind, budgeting will only work if you find a budget that works for you. If you have been unsuccessful with budgeting in the past, it is time to try a different budget and perhaps learn to change your money mindset. Give the 30-303-30-10 budget a try and start paying down debt and saving, while still budgeting in the fun stuff too!
