The Best Budgeting Method for People Who Hate Budgeting
Budgeting.
When you hear this word, how do you feel?
Maybe the thought overwhelms you. You might want nothing to do with it at all.
Having to keep track of everything you spend seems like a monumental task.
While budgeting might seem complicated, it doesn’t have to be.
The word “budgeting” sounds restrictive. But once you make it a part of your life, you’ll reap the benefits of financial freedom.
Whether your goal is to save up for a vacation or get out of debt, the right budgeting method will help you reach your goals.
Today is your lucky day if you’re looking to get control of your finances without running through hoops. In fact, you can set everything up within 5 minutes.
So what is this budgeting method?
Read on to find out.
What is the 50/30/20 Rule of Thumb?
It’s simple.
The 50/30/20 Rule of Thumb is a budgeting method that separates your income into three categories: Needs, Wants, and Savings. Having only three categories keeps budgeting with this method simple.
Let’s take a quick look at each category to see how this budget works.
- 50% on Needs- 50% of your income goes to your needs. Needs are anything that you would need to survive. For example, groceries, rent/mortgage, utilities, and transportation.
- 30% on Wants- Distribute 30% of your income to wants. Wants are anything that you enjoy spending your money on but don’t necessarily need for survival. For example, any money you spend on entertainment such as Netflix or going to the movies.
- 20% on Savings- After your needs and wants are met, the rest goes to your savings. As long as you keep your expenses below 80% of your income, saving 20% should be easy.
Applying the 50/30/20 rule might seem overwhelming at first. You might think that it would be a hassle dividing up your paycheck into percentages each time you receive it.
And you’re right, doing this manually takes extra time and effort. But what if I told you that you can make this process automatic?
Let me show you how.
4 Easy Steps to Apply the 50/30/20 Rule
1. Automate Your Savings
If you have a direct deposit set up with your employer, you can redistribute your paycheck by percentages. Instead of having 100% of your paycheck directly deposited to your checking account, take only 80%. Then have the rest (20%) deposited into your savings account.
Once your direct deposit is adjusted, you’ll see your savings grow after just a few months. The best part about this is that you won’t have to make any conscious effort to transfer money into your savings.
Now you might be wondering how this budgeting method helps you keep track of your expenses. The truth is, this method won’t tell you how much you’re spending. But you can easily supplement this by downloading a budgeting app.
Now, let’s explore how a budgeting app helps you implement the 50/30/20 Rule easily.
2. Download a Budgeting App
The 50/30/20 rule works when you spend up to 80% of your earnings. Manually recording everything you spend would drive just about anyone crazy. But you eliminate that altogether through a budgeting app. Budgeting apps automatically track both your income and expenses for you.
In the beginning, make some conscious effort to see where your money goes. The app lists and categorizes your expenses and gives you insight into your highest expenses.
After reviewing your expenses, you’ll begin to see your spending patterns. For example, you might notice that you can lower your spending by dining out less and cooking more at home.
In some cases, it could lead to canceling some subscriptions you weren’t aware of. By making a few changes, you’ll be surprised by how easy it is to live on 80% of your income.
3. Set Financial Goals
Having financial goals make budgeting more fun and encouraging. No goals are too big or too small for the 50/30/20 rule. Whether your goal is to pay down debt, buy a new house, or go on that dream vacation, budgeting will help you reach it.
Stay on track with your budget and make better financial decisions.
Think of it as a compass that helps you make spending decisions. For example, if your goal is to save $1,000 in 3 months for a vacation, you would need to put away at least $333 per month to reach that goal.
By comparing $333 to 20% of your monthly income, you’ll know right away if your goal is obtainable. Knowing what’s possible will encourage you to set and reach your goals consistently.
4. Watch Your Money Grow and Reflect
Once the 50/30/20 is established in your budget, you might notice that you can save more than the suggested 20%. The beauty of budgeting is that you can adjust it to meet your goals.
Whether you save 20% or 30% of your income is totally up to you.
Taking the time to reflect at the end of each month will help you improve your spending habits and make adjustments to better suit your needs. Empower yourself. Take control of how you build your wealth by making small changes to your budget.
Helpful Resources
*Disclaimer: I was not paid to recommend the resources listed below. I am sharing these resources based on my personal experience.
1. Money Bliss Blog
Money Bliss teaches you how to get out of debt and become financially free. It offers blog posts, online courses, ebooks, and personalized coaching services to help you meet your financial goals.
Whether you’re looking to pay off debt quickly, or saving for a down payment on a house, Money Bliss has you covered.
2. The Automatic Millionaire
Budgeting and saving money are the foundation for building wealth. Once you’re regularly saving money, you can take it a step further by learning how to invest.
The Automatic Millionaire shows you how to make investing easy and automatic. Similar to how the 80/30/20 rule is applied, it teaches you how to automate your investments. You’ll learn how easy it is to set yourself up to retire as a millionaire.
3. Intuit Mint App
Make budgeting easy by downloading Mint. Let the app track your income and expenses automatically for you. Save time and energy by letting Mint do all the heavy lifting.
Once you have the app set up, you’ll know exactly where you stand financially. Simply open the app to check your budget and stay on track with your money goals.
Walk Towards Financial Freedom
Now that you know how to set yourself up for financial success, what do you look forward to the most? Some of you might be saving to purchase that dream house in a few years. Or maybe you dream of traveling the world as a digital nomad.
Whatever your dreams are, getting control of your finances will enable you to reach them faster. The 50/30/20 Rule helps you budget for what you need and want. All while helping you consistently save money and reach your financial goals.
Take a few minutes to set up your direct deposit for automatic savings and download Mint. Walk towards financial freedom today. It takes less than 10 minutes.
Let me know what you think about the 50/30/20 rule in the comments!
