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50-30-20 budgeting

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  • Avatar GraceisOTL 
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    #212078 Reply
    Avatar StateOfMyHead 
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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.

    Click to expand…

    My take, its a catchy slogan to encourage basic awareness and budgeting. Definitely simplistic and I was wondering if the astute investors here had personal guidelines they consider. Similar to the 2x income:house recommendation and although as pointed out also not applicable for the extreme high earners.

    #212080 Reply
    Avatar ticker 
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    Status: Physician
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    I’ll start considering her personal budgeting plan when her national budgeting plan becomes something more reasonable than 70/50/-20.

    (Not intended to be partisan.  I would say the same about plenty of politicians with the other letter in front of their names.)

     

    I prefer the budget of John Wesley: “Earn all you can. Save all you can. Give all you can.”

    Hank Hank 
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    Joined: 03/27/2017

    If you need something, the State will provide it.

    If the State doesn’t provide something, you must not have needed it, comrade.

    #212148 Reply
    wonka31 wonka31 
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    I would suggest the opposite. Pick a percentage of gross incometo save that is at least 20% and spend the rest. Personally, I save a much higher percentage, but the reverse budgeting concept works much better imho. You don’t miss the money off the top and makes it tougher to overspend or have lifestyle creep get out of control.

    #212166 Reply
    Avatar Brains428 
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    I think if her audience is the general population, it’s not terrible. Saving seems to be a difficult concept, especially when some people feel like they can’t in order to be able to provide for a family. Even using a bank to hold money used for spending can be scary for populations who don’t trust them.

    You just have to go inside a gas station around pay day. There are a good deal of people who would rather hope to find the 10k scratcher than save that $100 every other week.

    One day I hope to shift my income away from 20/35/50/15 (savings/taxes/student loans/spending).

    #212175 Reply
    Avatar SkepticalOfFIRE 
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    Status: Physician
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    Goal from our combined gross income:

    35% taxes

    35% saving (includes before tax, after tax, retirement & 529)

    30% spending (includes needs, wants, mortgage payments and charitable donations)

     

    I have a strong fear of spending more than one of our salaries… in case one of us dies or loses our job or becomes disabled, I want us to be able to comfortably live off of one income.

    Also if something happens to both of us, I want there to be money to raise our kids.

    These are the things driving our higher saving:spending ratio.

    #212412 Reply
    wonka31 wonka31 
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    I think that her overall idea is good, simplistic in a Dave Ramsey kind of way and fine for the general population.

    The issue is that you can fudge ‘needs’. Buy a more expensive house, car, cell phone, food, etc. Those are all ‘needs’, but you can make them extravagant yet they still fall into that category. That’s why I advocate for saving first and spending the rest.

    #212434 Reply
    Avatar Tim 
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    Status: Accountant
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    Joined: 09/18/2018

    @skepticaloffire ,
    Which category do you put Student Loan payments?
    I prefer your method because taxes are a big piece that need attention.

    #212437 Reply
    Liked by StateOfMyHead
    Avatar StateOfMyHead 
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    I have a strong fear of spending more than one of our salaries… in case one of us dies or loses our job or becomes disabled, I want us to be able to comfortably live off of one income.

    Also if something happens to both of us, I want there to be money to raise our kids.

    Click to expand…

    Totally get this. Although the anxiety has reduced as we get closer to our 60s largely due to no desire to leave an inheritance or have anything more than palliative care.

    #212443 Reply
    Zaphod Zaphod 
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    Status: Physician, Small Business Owner
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    Goal from our combined gross income:

    35% taxes

    35% saving (includes before tax, after tax, retirement & 529)

    30% spending (includes needs, wants, mortgage payments and charitable donations)

     

    I have a strong fear of spending more than one of our salaries… in case one of us dies or loses our job or becomes disabled, I want us to be able to comfortably live off of one income.

    Also if something happens to both of us, I want there to be money to raise our kids.

    These are the things driving our higher saving:spending ratio.

    Click to expand…

    These are good thoughts and ethos, but of course do make sure you’re properly insured so this is guaranteed.

    #212459 Reply
    Liked by StateOfMyHead
    Avatar Financial Naive MD 
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    Status: Physician
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    Joined: 05/05/2019

    I have never had a budget.  I pay 33% in tax, the most important expenses that I want to control but have little ability to do so.  Then, I pay for necessary items, such as home, food, transportation, kid education and tax saving accounts. Well, if they are necessary or you deem they are, you will have to spend no matter what percentage on your budget.  The rest goes to investments.

    Now, why do we need a budget?  So we can spend 30% on “want” for fun, guilt free?  I do spend for fun and luxury items, but it would not be guilt free until I reach financial freedom.

    #212554 Reply
    Liked by StateOfMyHead
    Avatar Dr P 
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    Status: Physician
    Posts: 55
    Joined: 08/06/2016

    My budget is also 50% savings ~30% taxes and ~20% spending.
    Trying to keep lifestyle creep in check.

    #213017 Reply
    Liked by StateOfMyHead
    Avatar SkepticalOfFIRE 
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    Status: Physician
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    @tim  – I aggressively paid off my student loans which had ridiculously high interest rates (7.2-8.5%), but that was from a mix of what is now savings and spending.

    @zaphod  – I do have life insurance and disability insurance… at least until we save up enough of a cushion to feel comfortable without it.

    @DrP – I’m impressed with your savings:spending ratio!

     

     

    #213042 Reply

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