Diving Into the 50/30/20 Rule: Is It Really Possible?


The 50/30/20 rule of thumb is among the many effective strategies you might find when sorting out your budget. However, you might find that it is challenging to achieve it. Here are some tips to help you adjust it to your needs.

Everybody, especially adults, must learn how to handle their finances properly. It will be a critical skill to master for survival, so you will have to learn discipline, patience, and efficiency when creating a budget. Fortunately, you can find many effective methods that will allow you to enjoy a stable life. Among them is the 50/30/20 rule of thumb, which could help you thrive in your financial management plans.

However, you will find that incorporating it into your budget feels more complicated than you think. A lot of external factors like salary, necessities, and accidents could make your finances chaotic. It will be necessary to understand how you are going to utilize the 50/30/20 rule for your finances.

Cost of Living is a Critical Factor

The 50/30/20 rule got its name because you will be dedicating your income into three different categories. Fifty percent will go to your needs, including expenses like groceries, rent, transportation, and utility bills. Thirty percent will go to your wants, taking up things like your travel plans, shopping needs, and recreational activities. That leaves you with 20 percent, which you will now use for your savings.

The budgeting method hits many targets for most people, but you will find that it can vary depending on your expenses. Even if you dedicate half your salary to your essentials, you might not even make it because you earn too little. The cost of living becomes a critical factor if you notice that doing the math for the 50/30/20 rule is impossible.

The “needs” category might have to take up 80% of your salary to accomplish everything. Rent and car payments are hefty monthly expenses that might not provide you with wiggle room for your budget, making it essential to dedicate another area for them. Fortunately, those fixed monthly expenses will help you determine if you have to make sacrifices or adjustments.

Where is Debt in All of This?

Most people will realize that the 50/30/20 rule is something that financially stable individuals can pursue. If you start this rule, you will find that it has no room for debt. Unfortunately, most of us who start our careers already have student loans to pay along with the essentials. Is it a part of the 20% or the 50%? No.

Pursuing this at the very start will not be possible because you are working out at a negative score. While the 50/30/20 might be an excellent idea for your future, you will have to clear out debt first. Use your initial monthly and yearly salaries to pay for your student loans and other bank debts. The process will allow you to create a fresh start that makes the financial rule of thumb more achievable. Making an emergency fund will also be necessary to ensure that you no longer have to accumulate debt.

Unfortunately, the 20% saving rule will not be ideal for the strategy. Once you clear your debt and establish your emergency fund, you can proceed with the 50/30/20 rule for your finances. It might take a while before you get to that point, making it critical to seek assistance from your parents.

Huge Payments Require Assistance

The essentials take up most of the budget because of the hefty monthly bills. Unfortunately, it can be more challenging if your budget for rent has to go to housing. Buying a house is an investment, but it can be challenging to keep up with the 50/30/20 rule if the monthly mortgage is always at a high price.

The same goes for your auto payment bills and insurance plans. It will be necessary to seek assistance to make those monthly expenses lower. Fortunately, you can find a reliable mortgage company that can help you keep your budget for the house flexible. We talked about how debt is necessary to avoid, but this situation allows you to use it as a tool.

Should You Sacrifice Your Wants?

We spent a lot of time talking about your essentials and your savings, but what about your wants? You will have to maintain a budget that allows you to enjoy life as you please. If you want to try a new restaurant that caught your attention, the 50/30/20 rule might not want you to accomplish it. Are your friends traveling to a tourist hotspot and invited you to join them?

Your budget might not be enough for it. Fortunately, this is where your savings can help you out. Even though it is only 20 percent, try to dedicate a few bucks to specific stuff like travel or costly purchases. You might be financially disciplined, but letting it get in the way of you enjoying your life would be the opposite of its goal.

The 50/30/20 rule is an excellent idea to help you work on your budget, but it is not a fixed guide. You can determine if it is realistically possible for you. If it’s not, you can make a few adjustments until you find the strategy that is suitable for you.