50/30/20 Budget; Could This Be Your Answer?


I am a huge fan of Dave Ramsey. Mostly, I follow his entire plan and believe what he teaches.  I love cash, and I don’t love owing money to anyone.  

I am almost debt free and I do like the way he explains how to budget.  As a matter of fact, I just paid off my student loan and am sipping a glass of champagne as I write this.

money printables

But I do understand that there are other ways to budget your money.  Other knowledgeable people have explored the alternatives, and so I would also like to look into these alternatives.

There is a money theory called the 50/30/20 Rule that breaks down how you should be spending your money.  It is taken from the book, “All Your Worth: The Ultimate Lifetime Money Plan” by Elizabeth Warren and Amelia Tyagi.

Broken down into three main categories, Elizabeth and Amelia write about must-haves, wants, and savings.

50% of your earnings should be allocated to must-haves.

This includes anything that you must have to survive.  

Rent or mortgage, utilities, phone service, insurance- including car, home, and health, taxes, other health-related costs, gas, basic food needs, legal obligations like student loans, anything that you have a contract to pay like cell phones, gym membership, or satellite tv and other legal obligations like child support.


20% of your earnings go into savings.

Savings is a little misleading here because this also includes any other debt you may have.  Not only are you looking at things like your 401K contributions, but you are also looking at you credit card payments and anything extra that you pay on your other must-haves.

30% of your earnings spent on wants.

This could be anything that you want.  From a pedicure every three weeks to a trip to Paris.  From a Grande Soy Latte to a Michael Kors purse.

The theory is that life is not sustainable if you aren’t having fun while you do it.  I found cable TV to be a want, as long as you don’t have a contract with the cable company.  

Although, sometimes, those contracts can be broken with a simple verbal request.

save money printables

Here’s the challenge.

The book is excellent because it offers worksheets for you to get down and dirty with your numbers.  And it also scores you and gives you great advice based on your scores.

But what if your numbers don’t add up to the correct percentages?  Elizabeth and Amelia give great tips on how to make your numbers add up.  Tips like using cash, cutting out things like cable or satellite TV. The typical stuff to get your numbers to balance out.

If you have taken the quizzes and are thinking that there is no way you can get your budget to align with those percentages, you are just going to have to make those cuts.

Just try improving your numbers.

If, after you have completed everything and noticed your must-haves are at 63%, your savings is at 4%, and your wants are at 33%, can you decrease those must-haves by canceling some of those contracts?  Can you decrease your wants to 30% by skipping a couple of date nights?

The goal is to take 20% of your income and put it toward debt.  The authors say start with the debt that bothers you the most.  If you have a loan with your Aunt Martha and that weighs on your mind, pay that off first.  Or if your student loan makes you crazy every time you write that check, knock it out before anything else.

This is exactly what we have done and why my house and student loans are paid off and my car is not.  It was about emotion for me.  Now that the only thing there is left to pay on is autos, those will be gone in no time!!

Printables and words

Similarities and differences with Total Money Makeover.

They both believe that debt is bad.

They both believe that $1,000 starter emergency fund is all you need to begin.

AYW says one credit card for emergencies is ok while TMMsays to cut them up and never use them.

TMM says to list your debt from smallest to largest while AYW leans more toward emotional debt reduction.

AYW believes in 30% spending money and only 20% debt repayment while TMM prefers the debt snowball method.

Not everyone is the same, and there are so many great methods for getting out of debt.  I am a firm believer in finding your path.  As long as it doesn’t take you 15 years to do it.  But, you have to know yourself.  I am terrible with plastic.  I know that about myself. If you are good with credit cards and you won’t overspend AND you will pay them off each month, then good on you.

But, get real with yourself here.  Be honest and own your actions.




Leave a Comment

Your email address will not be published. Required fields are marked *