Episode 161: How Does the 50/30/20 Budget Work?

Posted Mar 25, 2021 | Chris Petrie

This post may contain affiliate links or links from our sponsors. Read our disclosure policy here.

Listen on the Podcast

The 50/30/20 Budget may be the easiest budget you will find. It’s simple, straight-forward and it only takes a few minutes to set up.

If you are someone who is overwhelmed with the idea of creating a budget or you just don’t like all the math involved with a monthly budget, the the 50/30/20 Budget is for you.

The first step is to determine your take-home pay. Once you have established how much you have each month to spend, you then will break down your spending into the three different categories.

50% Needs

Half of your take-home pay will go to the “needs” of your monthly budget. This will include your basic neccessities like your mortgage or rent, groceries, insurance, auto payments, and any other basic needs in your life. You can think of this as anything you must have to survive each day.

30% Wants

While you definitley think we all need everything, most of the things we need in life are actually wants. This may be going out to eat with friends, your unlimited data plan on your phone, and the all the premium cable channels. Think of your wants as anything that could be turned off during a financial emergency or financial crisis.

20% Savings and Debt Payoff

The last 20% is used for savings and debt payoff. This could be towards your emergency fund or to saving for bigger purchases in the future so you don’t go further into debt. This could also include your retirement savings if you’re self-employed since your retirement savings will come out of your take-home pay.

Debt payoff can also be utilized from this 20%.

The 50/30/20 Budget Is Not for Everyone

Although the 50/30/20 budget seems simple, it doesn’t mean it works well for everyone. For example, if you have a lower income, then 50% may not enough to cover your basic needs. For example, if your income is $2,000 per month and your rent is $800, this only leave $200 per month to cover food, utilities, gas for your car, insurance, and everything else that falls into the needs.

On the other hand, if you’re a high income earner, this budget wouldn’t work well for you either. Let’s assume your take-home pay is $50,000 per month. This budget would then assign $25,000 per month to cover basic needs in your life. I don’t care who you are, but $25,000 for basic needs would be hard to spend.

Do You Have a Monthly PLAN for Your Money?

The first step to any solid financial plan is to tell your money where to go instead of wondering where it went.

Here are the same budget templates I use and I will also walk you step-by-step with how to use them.

They’re all yours now!

Thanks so much for listening to the show and if you feel the content of this podcast was helpful, please subscribe to the podcast where you listen and leave a review!

Today’s show was brought to you by OneAZ Credit Union — my very own credit union I have been proud a member of since 2011. 

If you live in Arizona and are looking for a large credit union with a local, customer-focused feel for your personal or business banking needs, look no further than OneAZ Credit Union.

Chris Peach Author 150x150

Chris Petrie

Chris (Peach) Petrie is a personal finance expert, money coach, speaker and podcaster.

In 2011, Chris and his family were exhausted from living paycheck-to-paycheck and facing a mountain of debt. They started going against the society standards of misbehaving with money and made the decision to take back control of their lives and money. Within seven months they paid off $52,000, started saving like crazy and began building real wealth.

The word spread fast and Chris started showing friends how to create a budget over dinner. Soon after he started showing their friends how to do the same and eventually Chris started teaching personal finance classes around the community. As the need for the classes grew, Chris launched Money Peach in 2015.

Money Peach was created to help everyday people remove the stress and fear of money by showing them how to save more, make more, and keep more of their money.

Chris Peach has been featured in places like Business Insider, The Huffington Post, Elite Daily, and CheddarTV.

When Chris isn’t at “work” he can be found at the Crossfit gym or riding on the fire truck — Chris is also a full-time firefighter in Phoenix, Arizona.

Leave a Reply

Your email address will not be published. Required fields are marked *

Want to save more money and pay off debt?

Great! Grab the free budget mini course where I will give you a budget and show you exactly how to use it! The same budget I used to pay off $52k in debt, save money and build wealth!



Scroll to Top