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.

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.

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.

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

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.

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.

30% of your earnings spent on wants.

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