Discover the ins and outs of creating your personal budget with the 50 30 20 Rule. Simplify the process with a FREE 50 30 20 Rule Spreadsheet — making it as easy as 1, 2, 3.
Estimated Reading Time: 6 minutes
Almost every “how to save money” blog post EVER written seems to kick off with a spiel on creating a monthly budget.
Rightfully so, considering a budget is the foundation of our financial well-being. But why is it mentioned in EVERY post? Don’t we all have a general idea of how much we spend?
You’d be surprised. All those Target trips add up.
But really, it’s not uncommon to hear people confessing they’re not quite sure where their money disappears. The culprit? Often, it’s the lack of budgeting before the spending begins.
A month-over-month gamble and hope for the best scenario. That doesn’t sound like the most well-thought-out money management strategy. Does it?
Now, if you’re finding yourself nodding along because you’re the type who runs out of funds before the end of the month. Or if you’re just after a simple budgeting method to start your journey. You’ve come to the right place.
Let’s get started with some basics.
Why is budgeting important?
A budget is important because it guides you through the complexities of your income and expenses. By setting clear spending limits and outlining your financial priorities, budgeting ensures that your hard-earned money is allocated wisely.
A budget lets you know how much you have, what you’re saving, and whether you might be stretching your resources too thin. In simple terms, budgeting gives you control, allowing YOU to decide what and when you can afford it.
What is the 50 30 20 budget rule?
The 50 30 20 budget rule is a practical guide for managing your finances. It breaks up your earned income into three categories, needs, wants, and savings.
Unlike other budget planners or more complicated budgeting methods, the 50 30 20 rule keeps things simple with three easy steps.
And, you don’t need anything fancy—good ol’ pen and paper will work just fine. But just to make things even easier, I’ve included my personal 50 30 20 rule spreadsheet in this post.
It’s like having a friend help you with the math homework. I never liked math anyway.
How to use the 50 30 20 rule spreadsheet to create your budget?
The 50 30 20 budget spreadsheet provides a space for you to enter your monthly earned income, the money you have to budget for your household. I’ve added several rows in this section to allow you to personalize your income based on the number of income sources within your household.
The rule recommends allocating 50% to needs, 30% to wants, and 20% to savings. The spreadsheet uses those breakouts as “targets” for each section.
As an example, if your take-home monthly pay is about $4,000. The 50 30 20 budget will target 50%, so $2,000 to your needs, 30% = $1,200 to your wants, and $800 to your savings.
FREE 50 30 20 Budget Spreadsheet Download Here.
This tool not only assists with calculations but also helps in tracking your progress, ensuring you stay on course to meet personal finance goals.
Does the 50 30 20 rule apply to every budget?
This rule is super versatile. It not only caters to everyone but can also be easily customized to individual preferences and requirements.
Personally, when I started budgeting (living alone with no kids), I embraced this rule wholeheartedly. After writing down all my expenses, I discovered a pleasant surprise—I could save beyond the set 20% savings goal.
So, I made a little adjustment. Instead of following the 50 30 20 rule, I followed the 50 20 30 rule allocating more money to my savings category.
Of course, I’d recommend tweaking only in the needs or savings category. If you find your wants category stretching beyond the 30%, it might be time for a gentle lifestyle adjustment.
Ensuring the needs and savings categories get their fair share is most important.
What are the flaws of the 50 30 20 rule?
While the 50/30/20 rule is a powerful budgeting tool, it’s not without its limitations, but only if you’re sticking to it to the dime.
It may not be suitable for individuals with specific financial goals or unique circumstances. Perhaps you’re going through a unique circumstance right now that may not fit well within the cookie-cutter 50/30/20 budget. Or you may be living in a high-cost-of-living area where 50% of your income just doesn’t cut it.
Although those are some limitations. They are small adjustments that can be made seamlessly within the 50/30/20 budget template. This way you can ensure your budget fits your unique needs.
Is the 50 30 20 rule spreadsheet weekly or monthly?
The 50 30 20 Rule Spreadsheet is designed to capture your monthly income and expenses. This budget is generally applied on a per month basis. This timeframe allows for a more full-picture overview of your financial situation. This makes it easier to plan for both recurring and one-time expenses.
However, this is the fun part. There is no rule against getting creative and divvying up your weekly paycheck into 50 30 20 categories to celebrate small wins throughout the month, especially in the savings category.
It might be easier to put away $200 a week rather than trying to transfer a lump sum of $800 at the end of the month to your savings account. It not only feels more manageable but adds a touch of excitement to your savings journey. Celebrating those small wins is an essential part of your financial success.
What goes under each category?
- 50% for Needs: This category will capture all essential expenses like rent or mortgage, utilities, groceries, insurance, and necessary transportation costs. If applicable, it’s encouraged to also slot your student loans into this category as they are a necessary financial obligation.
- 30% for Wants: You will designate all non-essential spending such as dining out, entertainment, and fun activities to this category.
- 20% for Savings: This category will be crucial for building an emergency fund, contributing to retirement savings, and addressing any outstanding high-interest debt with “Accelerated Debt Repayment”. Beyond ensuring you have at least a small emergency fund, you should prioritize paying off any high-interest credit cards or payday loans. The interest on these debts can accumulate quickly, making them more costly in the long run.
How do I track and adjust my budget?
Budgeting isn’t a one-time, set-it-and-forget-it affair. Unless, of course, you’re currently cruising through life without any significant changes. If that’s not you, keep reading.
It’s important to periodically review your actual spending against your budget. Lucky for you, the 50 30 20 budget worksheet does most of the work for you. Just refer to the budget versus actual columns.
As you review, watch for any areas where you might’ve gone above or dipped below your initial budget plans. Try to figure out the why behind it and adjust where necessary.
Remember, life is dynamic, and your budget should be too. Make sure you keep accountability close to your heart. Ensure your wants don’t dig into your savings category. If they do, no worries! Just make a mental note to allocate a bit more to savings next month, creating a balance.
Your budget is a living, breathing document, and tweaking it to your needs is all part of the journey.
Tips for staying disciplined and committed to the budget
Financial health is a journey, not a destination. Here are some practical tips to stay disciplined and committed to your budget:
- Set realistic and achievable financial goals.
- Celebrate small victories to stay motivated.
- Find an accountability partner for mutual support.
- Regularly reassess and adjust your budget as needed.
Common Challenges and Solutions
Challenge: Dealing with unexpected expenses
- Solution: Establish and consistently contribute to an emergency fund.
- Solution: Prioritize needs over wants during challenging times.
RELATED POST: 9 Emergency Fund Mistakes You Will Never Make Again
Challenge: Overwhelming temptation to overspend in the “Wants” category:
- Solution: Allocate a specific amount for discretionary spending to avoid going overboard.
- Solution: Practice mindful spending.
What is mindful spending?
When I think of mindful spending, I see it as a lifestyle first and a financial practice second. Before anything else, mindful spending creates a connection between money and what truly matters to you. Its foundation revolves around making intentional and conscious choices about how you allocate your resources.
It encourages you to pause, reflect, and ask yourself whether a purchase aligns with your true priorities and long-term goals. By practicing this, you create an awareness of your spending habits empowering you to make informed decisions that are close to your values.
Mindful spending is a reminder that every purchase is an opportunity to invest in the life you genuinely want to lead. It creates a balance between your present desires and future financial goals. It attempts to guide you away from a life centered on instant gratification.
Here is a fantastic article about Mindful Spending if you’d like to read more.
Additional Considerations
If you don’t think the 50 30 20 budget is right for you, explore other budgeting methods such as the zero-based budget or the envelope system. Each approach offers unique advantages, and experimenting with different strategies can help you find what aligns best with your financial goals and lifestyle.
Examples of Other Budgets Like 50/30/20 to Try
Zero-Based Budget
- Allocates every dollar of your income to specific categories, ensuring that your income minus your expenses equals zero.
- Encourages detailed tracking and intentional allocation of funds.
70/20/10 Rule
- Devotes 70% of your income to living expenses and essentials.
- Allocates 20% to savings and debt repayment.
- Reserves 10% for personal desires and non-essential spending.
80/20 Rule
- Directs 80% of your income toward essentials and living expenses.
- Allocates 20% for savings, investments, and debt repayment.
Envelope System
- Involves using cash for different spending categories, with separate envelopes for groceries, entertainment, etc.
- Promotes better control over discretionary spending and discourages overspending.
60/20/20 Rule
- Allocates 60% of your income to essentials, 20% to savings, and 20% to personal spending.
- Provides a slightly different distribution to accommodate varying financial goals.
Feel free to adjust the 50 30 20 rule spreadsheet to experiment with different approaches until you find the one that best suits your needs.
Final Thoughts
Budgeting is not a one-size-fits-all application. The 50/30/20 rule provides an excellent starting point and the 50 30 20 rule spreadsheet can be a helpful tool to get you started. Feel free to tailor it to your needs. The key is to stay committed, track your progress, and make adjustments as necessary.
Your journey to financial well-being starts with the first step towards a budget that works for you.
FAQs
Is the 50 30 20 Rule Realistic?
Yes, the 50/30/20 rule is realistic for many individuals. However, you must remain adaptable and adjust based on your unique circumstances and financial goals. Flexibility is the key to the rule’s effectiveness.
As always, don’t be a stranger! Share your thoughts in the comments below. Your feedback is always greatly appreciated. Bye for now!
In this post, you learned all about the 50 30 20 rule spreadsheet budgeting.
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