How To Budget Your Money Guideline

Whether you're a parent with two kids or a recent college grad working your first job, this 50/20/30 guideline can help you assess your budget.  Learnvest planners often use this approach working with new clients to help illustrate the big picture of where their money is going.

Our guideline breaks your budget down into three buckets.  It's designed to help you determine the order in which your money can be allocated.



50/20/30 Broken Down

1.  Fixed Costs

These are bills and expenses that don't vary much from month to month, like rent or mortgage payments, utilities and car payments.  We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you're committed to paying them on a monthly basis.

When it comes to fixed costs, planners generally suggest that you aim to keep your monthly like total no more then 50% of your take home pay.



2. Financial Goals

Planners typically recommend putting at least 20% of your take home pay toward important payments or contribution that will help you secure your financial foundation.  We believe there are three essential goals everyone should strive for: paying down credit card debt, saving for retirement, and building an emergency fund. But your financial goals can also include larger savings priorities, like a down payment on a new home.



3.  Flexible Spending

Finally, consider budgeting no more than 30% of your take home pay toward flexible spending.  These are day to day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas.

We include groceries in flexible spending because even though food is a necessity in your budget, how you spend on food can vary.  Some weeks you might eat out more, while others you may buy more to cook at home.  Planners often say that it doesn't really matter what you spend your money on each month in this category, as long as you're aware of your spending and not going over your budget for the month.



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