You wanna know why my hair’s so big? It’s full of budgeting percentage ratio secretssss.
As a money-obsessed human, I hear and say the word “budget” all the damn time. You know when you repeat too much, the meaning gets all distorted and then you get dizzy and you blackout? Right?
But here’s the question no one can answer very well: What the hell should my budget even look like?
As a Millennial overachiever who likes gold stars whenever possible (honesty is chic, y’all), I looove to be told what to do. But no one can actually tell you what your budget is “supposed” to look like. Like the fragile snowflakes we are, no two persons’ bank accounts or financial needs (or financial neuroses, don’t get me started) are the same.
How can we budget better to be able to travel more?
However, hallelujah, because budgeting gods have conferred and they – meaning most of the Internet-having financial experts of the world – agree: There is a general outline that all good budgets can follow, at least at the beginning.
And you know what else? I tried it.
And that sh*t actually works. So let’s talk about it – and, for good measure, let’s ALSO talk about when it totally doesn’t work, too.
The 50/20/30 Rule
Yes, that’s the incredibly sexy name given to this budgeting outline: The 50/20/30 rule. It’s incredibly straightforward.
When you are given a paycheck – or any sum of money greater than $1, really – you divide it up thusly:
- 50% of if should go towards your bills.
- The “I need this to survive as a human” stuff: Rent or mortgage, bills, debt payments, subscriptions, groceries. Basically, if you don’t pay it, either you’ll literally die (mentally or physically) or someone in a suit will come after you? That goes here
- 20% of it should go towards your money goals.
- Maybe you want to build an emergency savings, eliminate debt, or just save up for Bali like every other dang Millennial. If your goal is to eliminate debt, your minimum payments are covered by that 50% Bills category. This 20% is for paying more than your minimums each month. That’s right. It’s B-E AGGRESSIVE time.
- 30% of it should go towards your fun money.
- This is the category you’ve been waiting for: The Whatever The Hell You Want category! Whatever’s not essential for your human survival – social stuff, hobby stuff, treating y’self – goes here.
That’s why I eff with this rule – that last 30% Whatever The Heck category. It supports my life mission that budgeting is not about limiting the fun you have with money; it’s about getting in control to allow as much fun as you want.
Now, this rule actually works out for tons of people. But let’s talk when this cookie cutter mess doesn’t fit you.
Not all of us fit in a box, right?
When the 50/20/30 Rule is Crap
Here’s the truth: If you want to get truly aggressive about eliminating huge debt or building up a travel savings fast? Unless your paycheck is a zillion bucks a week, 20% from every paycheck is not going to cut it.
When I got super serious about eliminating my $50,000 debt to travel, I calculated it: If I only used 20% of each paycheck for this goal, it would take me almost 15 years to take down my debt and build a year’s worth of travel savings.
Skrrrrrrr? Nununonunono, honey, no.
I messed around with the percentages, one paycheck at a time, and eventually, I reached a place where my rule was more like:
- 20% Bills
- 68% Money Goals
- 12% Fun Money
Yup. That’s what it took to get to my goals in the timeframe I wanted.
I moved in with family, and I eliminated lots of the things I thought I “needed” and became insanely frugal. But it worked. In less than two years, I was debt free and sittin’ on a real cute travel savings.
Not only can you mess around with the 50/20/30 rule to fit your life, but you should.
To build up your Money Goals percentage, you can ask yourself these questions:
- Can I slim down my Fun percentage without ruining my social life? (Yes. You can.)
- Is there anything in my Bills category I can truly survive without?
- Is there anything in my Bills category I can reduce? Can I get on the phone with my Internet people can squeak out a better deal? Can I find folks to share subscriptions with?
Remember: A rule is basically just a random thing someone said once. (Don’t quote me on that, lawyers.) But when you customize that rule to your reality, you become much more likely to follow it, because it isn’t “someone’s” anymore – it’s yours.
Take ownership of your financial situation, friend. You are the rulemaker here. Always.