It simply states that 20% of your income go toward debt payoff and savings. The problem with this budgeting method is that is doesn’t give any clear guidelines on HOW to pay off your debt. Now Brittney’s budget is in line with the 50 / 30 / 20 rule, and she can put more toward debt payoff on her car loan to pay it off MUCH quicker! How Do You Pay Off Debt With A 50 / 20 / 30 Budget? $150 (more shopping online + Rakuten cash back!) She can adjust her current spending to fit the rule, her updated budget would look like this: NEEDS Here’s what her ORIGINAL spending might look like in her life: NEEDSĪs you can see, Brittney is currently overspending on her NEEDS and WANTS, and is not putting enough toward her debt payoff and savings to fit the 50 / 30 / 20 rule. Brittney will need to take a look at her current spending and then ADJUST her life to fit the 50 / 30 / 20 guidelines.
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$4,000 x 20% = $800 for SAVINGS / DEBT PAYOFF Step 3: Adjust Your ACTUAL Spending To Fit Here’s what her budget is going to look like: Using the percentages, Brittney is going to take her $4,000 income, and split it up 3 ways. Step 2: Split your income between the 3 categories Her total monthly income that she will budget based on is $4,000.
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For those paid bi-weekly, this will be the total of 2 paychecks.Įxample: Brittney gets paid $2,000 every 2 weeks. How To Set Up A 50 / 30 / 20 Budget Step 1: Figure out your total monthly incomeįor this budget, you need to figure out your total monthly take-home pay. Let’s walk through an example of how this would look in a monthly budget. According to the book, your 401k should be included in the 20% for savings, but since your 401k is deducted before you get your paycheck, it makes way more sense to budget on your take-home pay instead. Note : This budget is for your after-tax pay. 20% of your income goes toward Debt Payoff and Savings.30% of your income goes toward your “ Wants” (Shopping, Entertainment, Restaurants, Hobbies, Etc.).50% of your income goes toward your “ Needs” (Housing, Groceries, Utilities, Transportation, Bills, Insurance, Debt Minimum Payments, etc.).It’s a simple rule to give a general guideline on how to budget your money. The 50 / 30 / 20 Rule was first coined by Elizabeth Warren and her daughter in her book All Your Worth: The Ultimate Lifetime Money Plan. What Budget Apps Work With The 50 / 30 / 20 Rule?.How Do You Pay Off Debt With A 50 / 20 / 30 Budget?.Step 3: Adjust Your ACTUAL Spending To Fit.Step 2: Split your income between the 3 categories.
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Step 1: Figure out your total monthly income.Try to stay away from temptations that will make you spend more than you should. Even when a budget has already been set, you need to make sure that it sticks to plan. You need to set your budget at a considerable amount based on your income and what is needed. Prepare yourself by setting aside extra cash. There may be circumstances where you’re forced to spend more than you normally do. A plan, like a simple business plan or an annual plan, should be set according to what is important. You would need to make a budget plan that works. It should be set according to what you need so you would have enough to cover monthly expenses. Next, you’ll be able to determine a budget that you can stick to. With these, you’ll be able to calculate your total income and expenses. This would include household bills and other payments as well as bank statements and savings. To create a personal plan for budget, there are several factors that need to be considered. Business Budget Planĭownload How to Create a Personal Budget Plan A plan, such as an audit plan and a daily plan plays a significant role to attaining a positive outcome. After all, you wouldn’t want to spend the money that you don’t have. Keep in mind that it’s easy to get carried away with spending, you might just end up purchasing random things that you wouldn’t even end up using.įollowing a strict budget plan is also a good way to keep you out of debt. A budget plan ensures that you have enough money for the necessities. It may sound a little far-fetched, but it does happen. Why Is it Important to Plan your Budget?įor starters, you wouldn’t want to spend a million dollars on a single bedroom renovation for your house. Similar to a business plan in pdf, a budget plan is made for the benefit of an entity. This is to assure that resources are managed properly. A budget plan can also help monitor income and expenses by setting a budget that fits accordingly. This will help you decide on what is essential and on what needs to be cut off. If you don’t have enough provisions to spend, budget planning would be the way to go.įirst off, a budget plan will allow you to have a spending plan with the money you’re left to work with.
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Download What Is the Purpose of a Budget Plan?