March 5, 2015

50-20-30 Spending Plan



The 50-20-30 budget (I prefer “spending plan”) divides your after-tax dollars into three buckets. The first 50% is for necessities, including shelter, food, utilities, transportation, clothing, etc. The next 20% goes to long-term savings and extra payments on any debt. This bucket includes contributions to your retirement. If you have a car loan, paying the minimum payment is considered a necessity. But if you make extra payments on that debt, that goes into the 20% bucket. This bucket does not include short-term savings, like a vacation. That’s for the third bucket (30%) which is for lifestyle choices such as “vacations, entertainment, gym fees, hobbies, pets, eating out, cell-phone plans and cable packages. These are things you do not have to have to get by, but are lifestyle choices.” Read more about spending plans by Rob Berger at http://www.doughroller.net/budgeting/is-the-50-20-30-budget-a-good-rule-of-thumb/

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