Why didn't I listen to my econ teacher in 12th grade? He told me how to budget, he told us all, but did we listen? Well, I don't know about everyone else, but I know I did not listen.
I was going through Pinterest when I came across an article by Laura Shin called "How to Budget Your Money With the 50/20/30 Guideline". The article was on learnvest.com, which I had never been to, and I was instantly drawn to the article because I had heard of the 50/20/30 guideline before. As I read the article I started to think about why I had never implemented the guideline.
When I was a senior I worked as a waitress and had a small income from that. I would put my tips into my savings account as soon as I left work. That was all though. I never did more and I always spent the savings. This was the perfect time in my life to implement the 50/20/30 guideline. What a mistake!
If I remember correctly, when I applied the guideline to my then current lifestyle, the numbers did not match up. I had no drive to make them match up either. I decided after reading the article that I should reconsider the guideline after all these years.
According to Laura, no more than 50% of your income should be applied to your fixed expenses. Twenty percent of your income should be devoted to debt and or savings. Then, 30% is applied to your variable income, the stuff you are never quite sure about.
The guideline is simple. I like that it is simple because sometimes it's hard to make a budget when there are so many possible categories to put your money into. I could micromanage my budget all day, but in the end I'm much happier with three simple categories.
I want to share with you what happened when I looked at my numbers to see if by chance they already met the 50/20/30 guideline, but I think first you should know a little about how my finances work.
I am a teacher by day and I am married to a steel mill worker. My husband and I had separate bills before we started living together and kept it that way after marriage. We do not share our paychecks by putting them in one lump joint account. We each have a sole banking account and we have a joint bank account that we can use to transfer money between each other. So, that means we have separate money, separate household bills, and we share money when each other asks.
When I looked at the guideline I had to first decide which bills were going to go into each category. When I tell you what my bills are, you are going to scream at me and wonder why I'm struggling with my bills. That's the whole point of this though, I'm struggling and I shouldn't be. Okay, in the fixed category I have prescriptions, my car payment, babysitting, and my family gym membership. In the variable expenses category I have groceries, tithe, and vehicle gas. In my debt/savings category I have credit cards. I have a plan for my debt and the first step is to pay off my husband's and my revolving credit.
How did the numbers stack up? My fixed category came in $234 less than half my income. So far so good, totally feeling groovy! My variable income came in $342 OVER! Oh no. Finally, I normally put anything I have left over from my check onto debt/savings, so that put me $109 under budget. In this case, this is bad. I should not be putting less money into my debt/savings category than the budget amount.
Now comes the work. Over the next week, I am going to attempt to trim down my variable income by $109. Ugh, so not looking forward to this. I have to do it though. If I want to get anywhere in life any time soon, then I have to start making changes. I'm going to start with a change I should have made 16 years ago in high school.
Why don't you try it too? At least see how your numbers stack up. Do they fit into the 50/20/30 guideline? Feel free to leave a comment and let me know how it goes.
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