You’re all tucked into bed, indulging in a late-night doom scroll on Tiktok or Instagram. You see that Becky from college just got back from a week-long trip to Italy. Must be nice. Another few scrolls and you notice Susan and her fiancé just bought a 2 story home. How did they afford all those bedrooms!? You start to question your own financial accomplishments and beat yourself up for not being farther along in your journey. Surly they are – I mean that must be how they’re affording this vacation and house, right!? What the heck should I spend each month and how much money are they spending!?
BUDGETING BASICS 101: HOW MUCH YOU SHOULD SPEND WITH THE 50/30/20 RULE
We are starting with my favorite topic: the 50/30/20 rule! The rule is quite simple. Take your total net income, after taxes and any other deductions, like your 401K contribution and health insurance. (Essentially, the amount that you see deposited in your account on your bank app).
50% of your income should be spent on your necessities.
30% of your income should be spent on your non-essentials.
20% of your income should be spent on your debt payoff journey and any other financial goals.
REAL WORLD EXAMPLE (STICK WITH ME HERE, THE MATH ISN’T THAT SCARY I PROMISE)
Let’s take my own finances so that I can put some hard numbers against these percentages for you. My monthly take-home pay from my corporate paycheck is ~$4,600.
(50%)x($4,600)=$2,300
(30%)x($4,600)=$1,380
(20%)x($4,600)=$920
WHY SHOULD YOU CARE
This is an incredibly powerful tool that you can add to your financial tool kit to help build your first budget!! Feeling uneasy about your finances? Create a budget. Constantly overspending on credit cards? Create a budget. Feeling like paying off your student loans is an endless spiral of doom and gloom? Create. A. Budget.
You are essentially giving yourself permission to spend that amount in each of those categories knowing that at the end of the month, you’ll be just fine and have covered all of your basics and needs.
IN CONCLUSION
In the midst of late-night scrolling, we often find ourselves caught in a web of comparison, our achievements diminished by the perceived successes of others. The cycle of self-doubt can be relentless. The never-ending stream of vacation photos and glamorous first-time homes leaves us wondering: How much should I really be spending? The answer, as we’ve explored, lies in the straightforward and empowering concept of the 50/30/20 rule.
By delving into the 50/30/20 rule, we’ve uncovered a transformative approach to budgeting that offers a sense of clarity and control. Armed with this tool, we can put an end to the incessant doubts and uncertainties that stem from financial comparison. The rule, while seemingly simple, carries the profound ability to reshape our financial narrative.
In adopting the 50/30/20 rule, we take charge of our financial destinies, free from the burden of comparison and self-critique. Armed with tangible figures and a clear plan, we can begin to live above the fog of uncertainty and create a fresh sense of purpose and control with our finances. By embracing the principles of the 50/30/20 rule, you forge a trail that leads not only to fiscal empowerment, but to a life aligned with your true priorities.
Once you’ve outlined what these percentages are for you, I highly suggest you further define the details of your budget and start tracking all of your expenses.
You can track your expenses using the RTFF spreadsheet. >CLICK HERE<
