The 50/30/20 budget rule | Finance World

I was raised by a mother who lived very frugally. Because of this, I learned to save every single penny that I could and now I don’t really know how to spend money on what I want, as now I consider everything unnecessary.

On the other hand, most kids (or now adults, I don’t know what we should be called) my age live paycheck to paycheck spending all of their money the second they get it. Another extremity.

So, what’s a budgeting plan that could help both ends?

What is the 50/30/20 budget rule?

You take your paycheck and you separate it into 3 parts. 50%, 30% and 20%. All of these parts will cover different aspects of your spending.

50% is what goes towards necessities. Normally this would mean housing, food, utilities, insurance, gas and all that. But if you still live at home and your parents take care of most of these matters then you will likely be able to cut down on these expenses. Nevertheless, you should at least pay your phone bill and if you drive a car then you should put away enough money to be able to fill the tank for the month. If you plan on moving away in the near future then I suggest saving the rest.

30% is for your wants and desires. Fast food, cinema, Netflix and everything that is not necessary for your everyday life, but you would still like to have. Yes, personal grooming is in this category. Haircuts, manicures, pedicures and everything in this category is counted as leisure.

And lastly, the 20% should be saved. Yes, 1/5th of your paycheck is going straight into savings and it hopefully won’t be touched for a good while. The only times you can dip into it is when you have an emergency or you plan on spending a huge chunk of money for a necessity (electronics, furniture, car).

How to budget as a teen

Why is this budgeting method good for younglings?

To be completely honest, any kind of budgeting method will help, but this specific one is great for adulthood as well. It leaves plenty of room for leisurely activities while also providing you with the ability to save. And for teens like me this is very much needed.

To me, this means having a strict budget that doesn’t mean saving as much as I possible can. I was finally able to let go of the anxiety shopping came with before when I was always aiming to get everything as cheap as possible. And now I can buy things without feeling guilty, because I know that I’m still saving enough.

As for overspenders… I’m pretty sure that all of you will be able to get used to this method fairly quickly. It’s easy to follow and if you only have a given amount of cash with you it’s even better.

Final thoughts

In the end, this rule isn’t set in stone and you can bend the numbers a little bit, which can make it easier to follow. In the end, all that matters is that you learn to control your money responsibly.

But there are a lot of other ways to save money, like checking prices before going shopping. What do you do to save?

4 thoughts on “The 50/30/20 budget rule | Finance World

  1. Very interesting post! I’d never thought of it in percentages like that. I spent a lot of money when I was younger, but now I’m being more careful and trying to save up for a house. I wish I’d been less spendthrift in my early twenties, but I guess it’s not too late…I’m in my late twenties now so I might actually have a house in ten years’ time lol


  2. My budgeting education was minimal until I met my father in law, he had the same theory as yours. I tried implementing it when I was married but alas I had a spendthrift of a husband. Now I am in charge of my own lie and finances I don’t have credit cards and my savings account is very healthy. Great post.


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