In our BrightDime Basics series, we’ve walked through the details of income, spending and how they come together to create a spending plan for your money; called a budget. If you have financial goals you want to accomplish like paying off debt or saving for a home, putting together a plan with short and long term goals will help you achieve them. The 50/30/20 budget is a flexible budgeting method we like for giving everyone a starting point with some broad category targets for spending.
The 50/30/20 budget starts with your after tax income and then allocates a percentage of that income to three broad categories: 50% to needs, 30% to wants, 20% to savings/debt repayment. Needs (50%) are things like housing costs, insurance, and utilities that would severely impact your life if you didn’t pay them. A want (30%) is any payment you can forgo with only minor inconvenience; things like cable TV and eating out at restaurants would usually go here. The last portion (20%) is for your monthly savings like contributions to your 401(k), a savings account, monthly investment amounts and debt repayment above the minimums or required monthly amounts.
Creating a budget and setting financial goals are an important step to keeping you on track for the things you want in life. You can read more about how to create a 50/30/20 budget here. If you need help getting started, just login to your BrightDime account and chat with a coach.