Not Only will this budget help you to live within your means; it also helps you to figure out exactly what your “means” This budget is touted by financial experts like Harvard’s Elizabeth Warren and MSN Money’s Lis Pulliam Weston, and for good reason… IT WORKS!
Needs/Wants/Savings
Think of your total monthly income as a pie:
With the 50/30/20 budget, you’re basically just cutting your monthly household income into three pieces. To get started, simply add up your total monthly household income, including:
- Your income (after taxes)
- Your spouse or partner’s income (after taxes)
- Any other sources of income, like child support
The biggest piece – the 50% piece – goes toward all of your basic necessities. This is the must-have stuff, including:
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The 30% piece goes toward all the extras – “wants” that are nice, but not essential:
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The 20% that’s left over goes to you in your savings account or your emergency fund (you can also use it to make an extra payment on a credit card or student loan).
