50 30 20 Budget with Examples (Free Budget Spreadsheet & Printables)
1. NEEDS – 50%
The government is happy as your taxes have been paid. Your standard pension contributions have been met. Your take home salary is in your hands. Time to burn that sucker up! (If that made you smile, continue reading. If that got you super excited and ready to spend, you really need to continue reading and probably should set this blog post as your default screen. haha).
Half of your take home salary should be used to cover your needs. These are the expenses associated with:
- Rent/Mortgage/Housing Arrangement
- Transport Costs/Car Payment
- Utilities
- Health/Life Insurance
- Grocery Items
- Toiletries
- Loans (Minimum Payment)
Your budget must be structured so that all those expenses fall within 50% of your income. Therefore, the costs associated with your housing arrangement pooled together with your choice of transport, groceries, etc. should not exceed half of your take home salary.
If any one of those items are pushing your “NEEDS” category beyond 50%, then this item has infringed into the “WANTS” category and is probably a luxury that needs reassessment. A detailed budget breaking down the dollar figures of your NEEDS should be built. Only then can a proper assessment be done to ensure that when put together, they fall within the 50% allocation.
For example if your grocery list consists of fresh lobster, paired with the finest steaks of hand fed cattle nurtured by blind Tibetan nuns and you’re having a hard time saving….you need to reassess your NEEDS!
Loans, whether in the form mortgages, car loans, credit card (minimum payment required) all fall within the “needs” section.
FAQ – What if my rent is more than 50% of my income?
If your rent (or any other BASIC need) is over 50% of your income, you have two options. You can either start searching for cheaper homes or you can find ways to increase your income. Get a second (or third) job. Find ways to make more money online or side hustle in your free time.
2. WANTS – 30%
Remember that you need to spend a little to save a lot. In order to save money, you must treat yourself from time to time. Set aside 30% of your budget towards enjoying life.
You work hard, you’re doing it, you’re making it happen, nailing your tasks…FEEL LIKE IT! The only way to continue working hard is to give yourself the motivation with a reward ever so often.
Basically, your wants are:
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