Budgeting For Dummies

Chapter 4

The 50/30/20 Budget

IN THIS CHAPTER

Putting together the 50/30/20 budget

Discovering the pros and cons of using a 50/30/20 budget

Reviewing scenarios that may influence how effective your 50/30/20 budget can be

In their book All Your Worth: The Ultimate Lifetime Money Plan (Free Press), Senator Elizabeth Warren and Amelia Warren Tyagi first shared the concept of the 50/30/20 Budget Rule. Senator Warren created the 50/30/20 Budget Rule to help American families achieve greater financial stability.

The 50/30/20 budget allocates money for all your financial needs, wants, and goals in a simple formula: 50 percent of your income goes toward your needs, 30 percent goes toward your wants, and the remaining 20 percent goes toward your savings and debt. This budgeting guideline should make people feel less stressed about money management because it’s easier than other budgeting methods such as the zero-based budget in Chapter 3. It may also be a lot more flexible to follow and — dare I say it — fun. (And I have both Stephen King and my cat mentioned in my professional bio. I know about fun.)

Senator Warren is also credited as one of the creators of the Consumer Financial Protection ...