If you have a dire loan situation, you may want to allocate more than 20% toward that category. If you’re spending 5% in this category, it may be because you’re not contributing anything to your 401(k) and 5% of your income goes to your student loans. What the Critics SayĬritics of the 50/30/20 budget say it’s overly simple and doesn’t show enough information.Īnother failure with this budget is the 20% Saving & Investing category. For example, if you’re spending 35% on needs in one month and 45% the next, you’ll know that something drastic changed. It reveals where your money is going with a quick glance, and it can also show trends quickly. This type of budget shows if you’re spending too much on any one category. It helps people stick to a budget because it only takes a few minutes to put everything in the right category. Instead of making and tracking a dozen different categories, the 50/30/20 budget simplifies this process. If you have low-interest debt, it may be appropriate to start investing, especially if you’re eligible for an employer-sponsored retirement plan (capitalize on any sort of matching contribution system they may offer). If you have an emergency fund of at least $1,000 stashed away (and preferably one that covers 3-6 months of living expenses), it’s time to start tackling high interest debt and then on to investing. Where you are in your financial journey may dictate how to appropriately spend money in this category. Any other essential item that cannot be foregoneģ0% of your income goes towards wants. This category is often self-explanatory and includes things that provide enjoyment in life, such as leisure activities, vacations and more :Ģ0% of your income goes towards, savings, investing and debt payoff.
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