What if the 50 30 20 Rule doesn’t work for me?
The 50 30 20 Rule is a guideline for monthly spending as a percent of income. It suggests that 50% of your monthly income should go to needs, 30% to wants, and 20% to savings. It’s a ratio for balanced spending.
However, the 50 30 20 Rule might not work for everyone. If you live in a city where rents are expensive, for example, your basic needs may add up to more than 50% of your income. If you have a healthy salary and an opportunity to save more, it might be a good idea to aim for more than 20% of your income.
A percentage-based budget can still be a simple way to track expenses for any lifestyle. Most financial planners recommend saving at least 20% of your income, but if that’s not an option, target 10% to get started.
Percentage budget options
Our team at Brightfin has different financial goals, so we created a few different options for percentage budgets. Our 4S method is based on four words: Spend (needs), Splurge (wants), Save (savings) and Share (for gifts; included in Splurge).
Percentage budget options in the Brightfin app
The Regular (50/30/20): If you’re a middle class, middle-of-the-road earner or you’re not sure where to start, this original balanced ratio might work well for you. Give it a try and you can adjust to a different option once you see how your spending breaks down.
The Debt Crusher (50/20/30): It’s a new year and a lot of people are looking to pay off their debt, whether student loans or credit cards. If money is already tight, trimming down on needs might be difficult, but spending less on wants might be a more realistic way to prioritize debt repayments.
The YOLO (50/40/10): Are you done with older people scolding you for spending your healthy, energetic years enjoying life? They’re just jealous. Still, making a habit of saving something every month is a good place to start. That will also help you learn how to save more later on, when you actually earn more.
The Wealth Builder (40/20/40): A lot of personal finance content, in mainstream media and social media, is focused on debt. But being debt free is only one small part of a healthy financial picture. If you know your expenses and can save a little more, invest that extra money now and let compound interest work its magic.
The FIRE (20/20/60): FIRE stands for Financially Independent, Retire Early. The goal for FIRE afficionados is to build up a nest egg early and live on earnings from investments rather than a salary. It’s the retiree income strategy, just much earlier than traditional retirement. FIRE requires specific planning and it’s not for everyone, but there’s a lot to learn from prioritizing aggressive savings.
In this economy? (60/30/10): What’s expensive these days? Housing, health care, education, and now even eggs. Many people find that allotting only 50% of their income for needs simply isn’t enough. This option allows for those inflationary pressures but also keeps a habit of regular savings.
All these percentage budget options are available in the Brightfin app for iOS. Which Priorities setting works best for you?
See what 50 30 20 and other percentage budgets look like for your income.
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Friends, I don’t have a trust fund. I’ve been living on savings while starting Brightfin. That means it’s been a no buy/low buy 2024 for me. My own breakdown based on the fixed “income” I planned for is about 85% Spend, 15% Splurge, and 5% Save. I still manage to Share a little too. I’m hoping to reset and get back to The Regular in the new year! At least I know I how I’m going to keep track. 🙂