Since 2020, the world has been learning the importance of not only physical health but also financial health. Shops and restaurants having to close due to lack of customers and don't even get me started about the supply chain issues. Essentials becoming more and more scarce means prices are going up, up, up. Everyone – especially single moms – has been looking for ways to make their hard-earned money stretch as far as possible.

The Ultimate Guide to the 50-20-30 Budget Rule

As single moms, it is even more difficult because we must not only take care of ourselves but also our children. This budget is a good option for me – and hopefully you! – as it helps makes sure that what income I am able to earn is being used in its most efficient manner while also helping to build a nest egg. Of all the different budgeting systems, the 50-20-30 Budget is definitely one of the simplest and easiest to follow, even if you have irregular paychecks.

50 20 30 budget guide: woman budgeting with calculator

How does the 50-20-30 Budget work?

This budget helps by ensuring that your money is used effectively without being too overly complicated to understand or follow. There is a basic rule to this system: divide up your monthly (after-tax) income into three different categories: 50% for needs, 30% for wants, & 20% for savings/debt repayment.

You may wonder, ”why not save more?” and if you're fortunate enough to be able to save more, awesome! If you are in debt, you will want to set aside 20% for your debt repayment. The reason you want to pay your debt off first – especially credit card debt – is because it's usually a higher interest rate than what your money will earn in savings (or even in some stocks and bonds).

By following this simple budgeting system, you will set up a solid foundation for your spending and saving habits It will be a financially sound lesson to teach to your children for them to use in their futures. This also ensures you have a cushion when unexpected expenses pop up!

The 50/30/20 budget system was created by United States Senator Elizabeth Warren and her daughter, Amelia Warren Tyagi. They researched it for over 20 years and found that is was an easy system to follow that also helps to save even when things may seem too tight to be able to. Eventually, their findings were published into a book in 2005 titled, All Your Worth: The Ultimate Lifetime Money Plan”.

50% Needs

Look at expenses that are necessary for living and should not be cut out. These include such things as:

  • monthly rent
  • utilities like electricity, water, and cell phone
  • transportation expenses
  • other basic needs for living
  • insurance (medical, auto, life)
  • minimum loan payments (mortgage, car payment, etc)

These are costs that you must pay to keep your four walls. Some – myself included – also count savings as part of their necessities. Having a savings cushion has saved my ass in many situations so for me, saving as much as possible is a necessity. You'll have to decide if savings are a necessity in your mind or not.

30% Wants

With the essentials covered, you will need to look next at the 30% wants. These are things that you would like to have or experiences you want to enjoy. Some examples of these are dining out at a particular restaurant, buying new clothes when you already have a closet full, subscriptions (like Disney+, Hulu, Scribd, and Amazon Prime), and the gym membership you're not using. These are things you desire but do not require to have in order to be able to survive.

Look at expenses such as:

  • eating out
  • entertainment (going to the movies, ball games, etc)
  • cell phone plan (get this one reduced ASAP)
  • vacations
  • manicures, pedicures, etc
  • anything else that is not a NECESSITY

Many of these things can be cut down to get you down to 30% – some can be cut out completely and you can add that money to your debt repayments or savings.

20% Savings or Debt Repayments

Because of high interest rates on most debts, it's vital to start paying them off as soon as possible. If you decide you want to file bankruptcy, do that before you send thousands in repayments. If you want to do a debt repayment program, make sure they aren't charging you outrageous fees – settling on a debt should come out in your favor. Otherwise it's a loss to the company.

Starting a savings nest egg as soon as possible is in your best interest. Even if you start investing with just $5 a week (I started with $5 a month!!), EVERYONE can prioritize and find $5 a week to make this happen – even if that means taking cans to recycle. Don't feel like you're above or too good for using a little elbow grease to start saving and investing. Work hard now so you can be a princess later. 😉

50 20 30 budget guide: woman with calculator

Like many single mothers, you may have had to take out some financial loans to ensure that tough times are easier, and your child’s needs are met. I remember paying an arm and a leg for a couch and bunk beds from a place like Rent-a-Center – I think the interest was like 30%!

Many single moms also open credit cards to use as a safety net – then life gets in the way and the payments aren't made on time. Or, just as bad, you're just making the minimum payments. Making the minimum payments on credit card isn't even as good as treading water; interest rates and late fees are so high, it's going to take a decade or more to pay off a $10,000 balance unless you start to bring more money in.

While monthly payments are considered a part of the Needs category, the 20% of the budget (should you choose to use it for debt relief) is meant to be additional payments made to help erase it as quickly as possible. You can make payments towards the principles on loans or bring down your balance on your credit cards. It is an effective means to help lower your debts and raise your credit score.

Remember you can also earmark this as savings – or maybe you want to do 10% and 10%. That makes it a 50/30/10/10 budget, but still… same purpose. 🙂

If you choose to use this part of the budget for saving purposes, consider placing it in stocks or a high-yield savings account. Don’t place the money in a shoe box in the top of your closet, as sitting money doesn’t generate more. When you invest in stocks, you can watch the total as it grows and grows.

Consider creating a more long-standing savings plan. Opening a 401k (especially if you have a match at work!!) or retirement account is an important step towards your financial freedom. You can also open a Health Savings Account (HSA). With an HSA, you don't have to worry as much about doctor’s visits or medicine costs.

We live in Mexico now so we pay out of pocket for all doctor visits. Even so, the amount we've paid (with hospital visits, a surgery, and multiple visits to specialists for 3 of us) has been far less than what I would be paying for monthly insurance in the United States!

Young African Woman Calculating Invoice With Calculator

Benefits of 50/30/20 rule in budgeting

One of the benefits of this budgeting plans is its flexibility. Some months, you may find that your needs are more than the 50% you’ve allotted from your take-home income.

Should this happen, first see if you can reduce the costs of these expenses. Shop around for less-expensive housing (in this market? HA! but some day this will be good advice). Learn the money saving art of couponing to help make stocking your shelves not cost as much. Don't forget to shop at discount stores and thrift stores for essentials as much as possible.

This budget is not meant to deny you a chance to enjoy life. It is meant to keep you conscious of the money you spend and how you spend it. Sure, we would all like to be able to eat out multiple nights a week in order to avoid the sink full of dirty dishes the next day. However, especially as a single mother, it is difficult to feed two (or more!) mouths and every dollar needs to be accounted for and spent mindfully so you don't find yourself short at the end of the month!

Making the conscious choice to put the $20-$30 you were going to spend at Applebee’s back in your pocket is a sacrifice that you may have to make but you are making it for the right reasons – and the result is marvelous.

Who is the 50-20-30 Budget right for?

The effectiveness of a budget depends upon each person’s individual situation. For the 50-30-20 budget, you will want to try it out if you are new to budgeting and have big financial goals.

Budgeting can seem intimidating. No one wants to take the time to come up with their own system to ensure they are able to meet their financial needs. It requires a lot of forethought, research, and implementing.

two women discussing 50 20 30 budget

By choosing to institute an already composed budgeting plan, it is easier to calculate and figure out how to follow. Without having a budgeting system in play already, you may find it easier to adhere to the rules of the 50-30-20 without conflicting previous plans getting in the way.

By using the 50-30-20 rule, you can begin your Sinking Fund. Whether it’s to make a big purchase or build an emergency fund, having a set amount you put away is beneficial towards your family's future.

One of your goals, and main reasons to start using this budget, may be to purchase a home for your family. Having a home will provide your family with more security than a place where the rent amount increases each time you have to sign a new lease.

The housing crisis seems to get worse and worse each day, especially for renters. Taking control of your finances is the first way to take control of your life. The more money you have, the less affected you will be by market issues like this.

Who is it wrong for?

Budgeting is for anyone who is wanting to better manage their money, but not every budget is meant for everyone. Budgets are only effective if their system meets the financial situations of the individual.

Those who live in a lower income situation will find the 50-30-20 works well to help them cover their needs, meet some of their wants, and even build a savings.

However, if you're living where your needs are taking up more than 50% of your income, you may not find it as beneficial. Sure, you may thing that just adjusting the numbers can help in this situation so that the percentages work, but this will only work to prolong the results you are seeking. Mainly, it can take twice as long to create a savings account and even longer to reach the same amount as you would if you stick to the original numbers.

With that being said, if you find your needs take up more than half of your income, you may have a cash flow problem. I was stuck in this position for many years. The way I got out was by increasing my income with my side hustles.

How to set up a 50-20-30 Budget

First thing you need to do is calculate your after-tax income. Most employers provide a pay stub which breaks down the money you earn. It will show you the hours you worked and the amount you earned from it. Then, it will show your tax deductions. The final results are the amount you will receive, which is equal to the value of your paycheck.

calculator and budget

The only thing you need to do differently is if you have the price of health insurance and pensions taken out of the check to calculate them back in as you need to see what you bring home with only the taxes taken out. Consider the insurance and pension expenses as part of the Needs category.

If you are a freelance worker, you will need to calculate your after-tax income by looking at what you earn in a month and take out any business expenses and any amount you set aside for taxes.

Those who work irregular hours may have a more difficult time time figuring out their standard take-home value than those who are paid a salary. Salaries are not based off hours worked and are paid a standard sum each payroll period. If you work hourly, you may earn less or more depending upon factors of Paid Time Off, Holiday Hours, and other determining factors.

The next step in creating your budget is to categorize your spending from the previous month. Take a look at every charge taken out of your bank account from the month before to get a better idea of how you are spending your money. It would be easy by printing out a copy of your balance summary from your online portal or go into the bank and ask for print out yourself should you not have the ability to at home.

This is going to be really, really rough for some of you – I know it was for me. Take a highlighter to your bank statements. Mark it if it’s for needs (utilities, groceries, etc), wants (eating out, getting your nails done), debt (making extra payments), and any other category that you may need to use. Make sure to be as honest as you can. Yes, it's painful – but that daily coffee isn't a necessity so stop acting like it is! You can make your favorite coffee drinks at home for a fraction of the cost.

The final step to crafting the budget is evaluating and adjusting your spending to match the 50-30-20 rule. With all of the facts laid out on the table, you can now see how your spending is affecting you and your family. Perhaps you are spending too much money on things you want and not on what you need. Or maybe you could use that money to begin building your financial nest egg. By looking at the data, you will be able to see things you can cut out.

It is also feasible that you are spending too much in the Needs category. By seeing that you spend 60%-70% in this category, it may signal that you need to look for cheaper but still effective means of getting the same results. You’ll know if it is time to look for a more affordable apartment or perhaps exchange your more expensive car payment for one that is less expensive. During a housing crisis and a supply chain crisis that is making used cars more expensive than new cars, that probably isn't a possibility… but we won't be here forever.

50-20-30 Budget vs 30-30-30-10 Budget

Similar to the 50-30-20 Budget, the 30-30-30-10 divides up your budget needs into simple spending categories: 30% for Housing, 30% for Necessities, 30% for Financial Goals, and 10% for wants.

Housing only covers the rent or mortgage that you pay for where you live. Necessities covers the other items that the 50-30-20 Budget considered in the Needs category (utilities, groceries, internet, etc). Financial Goals are the amount you plan to either put into savings or use to lower any outstanding debts. The final 10% will go to Wants, which is your dining out, entertainment, or other unnecessary purchases.

The two budgets, though calculated differently, both work to make your financial health better than it was before. Each budget has its own unique benefits. By using the 50-30-20 Budget, you will allocate more money towards your optional expenses which may feel more restricting to those who are not accustomed to setting aside their wants for what is more financially responsible.

The 30-30-30-10 Budget allows for more money to go towards the savings part of the budget while restricting your ability to spend too much on wants. Really you just need to look at your financial situation and figure out what is the best budget for you. If one budget doesn't work for you, try another!


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