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Get Your Spending Under Control with the 50/20/30 Budget Plan

Spring is a pretty hectic time, financially speaking. Tax season is on the horizon, and many young professionals will be paying in for the first time rather than receiving that handy refund. This can blindside many individuals unaccustomed to seeing a sizable portion of their income vanish like some 5-cent magic trick at the hands of the government. If you’re one of these people, or if you just have a hard time controlling your spending habits, the 50/20/30 budget plan might be for you.

The purpose of this tried and true budgeting template is to assess your spending honestly and then prioritize your monthly contributions according to a categorization of your expenditures – 50% toward monthly bills, 20% toward your financial goals, and 30% toward your more disposable income. This way, your major costs, such as your rent and car payment, are easily covered, leaving you with a bit of extra dough to spend at the bar or the game or a dime bag. You know, whatever floats your boat. (Who said potheads can’t be responsible?) Let’s take a closer look.

50: Monthly Bills

Your fixed costs are obviously the most important, and they vary little from month to month. You need a roof over your head. You need affordable transportation to and from work. You need food on the table. There’s just no good way around these things. This also includes utilities, such as your electric and gas bills, and any other monthly bills. So if you’re planning to Netflix and Chill with that right swipe from Tinder, throw that $8.99/month into this category. Same goes for your cell phone, Internet, etc.

The general idea is that roughly half of your costs should be going toward your basic living expenses – the things you count on from month to month. If and when this number starts to creep over 60%, you might want to rethink your “bare necessities.” Maybe your crib is a bit too lavish or your whip is a bit too fly. Either way, keep this number closer to 50% of your net income, and you should be all set.

20: Financial Goals

Here’s where people most commonly short themselves. When you’re in your 20’s or 30’s it’s only natural to think that you’re going to live forever and that your job will be enough to support you for as long as necessary. Unfortunately, the human body is infinitely fragile, and we will all pay for our youth someday. None of us get out alive, but we could at least get out without causing serious damage to ourselves and our families.

With those happy thoughts in mind, 20% of your take-home pay should be structured to help you gain financial security. Specifically, you should use this money to pay off credit card debt, built a retirement fund, and create an emergency fund in the event that you lose your job or have to take on unexpected responsibilities. Of course, this will vary depending on what you’re saving for, and if you’re looking to put a down payment on a home or new car, this would be the category to place your money in. Just recognize that you’re investing in you and not your interest, so this section is for you – not your interests (i.e., no new Gibson SG).

30: Disposable Income

At last! Time for a little fun! This portion of your budget should include your groceries, but it also should include your wardrobe, a trip to the movies, beer money – basically anything that reminds you that life is more than just work. Think of your disposable income as anything that isn’t A) a total necessity, or B) a financial commitment for your future.


Obviously, your flexible spending will be just that, but make sure that you keep it at or below 30%. No your limits and spend accordingly. There’s nothing wrong with going out on the weekends, but if that drunk you’re planning on tying on comes at the expense of your student loan payment, it’s a wasted drunk indeed. If you don’t keep this section of the budget under control, your other (more important) priorities could suffer immediate and significant damage.