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50-30-20 budgeting

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  • Avatar StateOfMyHead 
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    I’m sure this is too simplistic for the hardcore WCIs and likely discussed previously which I was unable to locate with search or scanning past few months titles. Do you use a version of 50-30-20 budgeting and if so what are your percentages? Thanks in advance.

     

     

    #212024 Reply
    childay childay 
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    Perhaps you can explain what 50-30-20 budgeting is?

    #212026 Reply
    Avatar StateOfMyHead 
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    Sure, according to Investopedia: “Senator Elizabeth Warren popularized the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.” The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants while allocating 20% to savings.”

    #212029 Reply
    The White Coat Investor The White Coat Investor 
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    Why would you let a politician decide your budget?

    I think for most docs, you can never really spend more than 50% of your gross because 30% goes to taxes and 20% goes to savings.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    ENT Doc ENT Doc 
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    Was this idea floated before or after she decided to give everything away for “free”?

    Avatar angeladiaz99 
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    I prefer

    50 = savings
    30 (or more) = taxes
    20 (or less) = I can spend it all without guilt

    #212033 Reply
    Avatar Peds 
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    Sure, according to Investopedia: “Senator Elizabeth Warren popularized the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.” The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants while allocating 20% to savings.”

    Click to expand…

    no.

    mainly because i base everything off of gross.

    so no.

     

    #212038 Reply
    Liked by StateOfMyHead
    Lordosis Lordosis 
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    If a high income professional is spending 50% of their salary on “needs”  They need to redefine what they really need.

    “Never let your sense of morals prevent you from doing what is right.”

    Avatar StateOfMyHead 
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    Sure, according to Investopedia: “Senator Elizabeth Warren popularized the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.” The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants while allocating 20% to savings.”

    Click to expand…

    no.

    mainly because i base everything off of gross.

    so no.

     

    Click to expand…

    Thanks for responding. Do you have guidelines based on your gross income?

    #212040 Reply
    Avatar Peds 
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    of course.

    #212045 Reply
    CordMcNally CordMcNally 
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    I think most budgeting “rules” are ridiculous. I prefer to work backwards. I save however much I’ve determined I need to save to meet my retirement goals. After that, I look at my fixed expenses (I guess this would be the “needs” in your proposed budget) and then my variable expenses (“wants”). If it doesn’t add up then I need to adjust my variable expenses. One caveat is that my fixed and variable expenses are typically sufficiently low enough that I just put the rest leftover back into savings every month.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    Avatar StateOfMyHead 
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    I think most budgeting “rules” are ridiculous. I prefer to work backwards. I save however much I’ve determined I need to save to meet my retirement goals. After that, I look at my fixed expenses (I guess this would be the “needs” in your proposed budget) and then my variable expenses (“wants”). If it doesn’t add up then I need to adjust my variable expenses. One caveat is that my fixed and variable expenses are typically sufficiently low enough that I just put the rest leftover back into savings every month.

    Click to expand…

    Thanks, working backwards is how I have always done it also. I’m kicking around a significant upgrade in primary residence which would be an extravagance not a need and has me a little squirrely so I wanted to ensure I have looked at it from all possible angles.

    #212055 Reply
    CordMcNally CordMcNally 
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    Thanks, working backwards is how I have always done it also. I’m kicking around a significant upgrade in primary residence which would be an extravagance not a need and has me a little squirrely so I wanted to ensure I have looked at it from all possible angles.

    Click to expand…

    As long as you’re meeting your savings goal then you’ve just got to decide what your typical costs and wants are each month/year and go from there. Just as work is trading time for money, budgeting sometimes requires you to trade one thing for another.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #212058 Reply
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    Avatar Kamban 
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    I look at it this way.

    Save 30% of gross income. Pay taxes with the remaining money. Live off the rest.

    Usually some money is remaining after this and it usually gets invested. Any dividends or distributions from investments gets reinvested at this point. When I retire it might become my income stream.

    Did not know that Senator Warren has taken up a side gig like Suze Orman. 🙂

    #212069 Reply
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    Avatar Tim 
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    The problem I have with 50-30-20 is that this approach conveniently deflects to after tax. When she defines “needs” I don’t have a clear picture of what that is. You know, what does government provide and what do I provide. Don’t care to get into percentages of net unless she defines the tax and what government services are available for free. Kind of like solution ignoring the problem. I don’t follow Jim Kramer’s “Am I diversified” segments either.

    Does she have any data to back this up? Sure would like to see how 20-50-30 compares.

    #212075 Reply
    Liked by StateOfMyHead

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