There comes a time when we yearn for financial progress and the only way to begin to accomplish this is through an effective budget. When I first thought about making a budget, I wondered what was the most efficient process to get all my little ducks in a row.

A few questions were raised such as, how much fun money can I really have? How much am I supposed to save or put aside for retirement? Questions that should be answered by a solid budget.

There had to be a budget that could scale for everyone, whether you’re a wealthy professional or a college grad. It’s not fair to say you have to save $1,000 a month, when for some of us millennials, that may be our entire monthly income. True story.

We need a budget that not only tells us where our money is going, but will also tell us in what order to spend it.

Well guess what, such a miracle budget exists, allow me to introduce you.

Reader meet the 50/20/30 Rule.

Elizabeth Warren, and her daughter, Amelia Warren Tyagi, conceived the 50/20/30 rule in the book, “All Your Worth: The Ultimate Lifetime Money Plan.”

Assuming you have already figured out your monthly – after tax- income, the budget outline is this:


Now what is an essential you may ask? Great question – put that 60″ plasma tv down – as I was saying, an essential is anything that you can not survive without. And I mean if you can not afford this item you may actually die, or be injured. Ok, I am being dramatic. Just don’t trade your water bill for wifi, you won’t last very long.

  • Groceries are essential. Why? Food.
  • Rent is essential. Why? Shelter
  • Car payment is essential. Why? Shelter. But mostly just to get to work.
  • Car insurance is essential. Why? It’s the law.
  • Even that annoying minimum payment on your credit card is essential. Why? It will affect your credit score negatively.

Are you getting the jist? Good, now lets move on to the next step, it’s my favorite!


Now, this is where we separate the boys from the men; girls from the women, and so on… Point is, this step requires discipline, and quite possibly make or break you fiscally.

This is your foundation.

Here we take at least 20% of our after tax income and dedicate it to financial priorities. Such as contributions to retirement, savings, and paying down debt.

I want to stress the fact that it is at least 20% of your income.

IF, you’re making a decent income it may only require 15% to max out your retirement accounts, and have stocked away a nice emergency fund. What do we do with the other 5% Seth? Well if you are so lucky, you can come up with another priority to fill the void. E.g. travel, christmas presents, a new car fund. It doesn’t have to be something boring like a 529 plan, it is whatever you deem fit to be a priority in your life!

Be sure to make these contributions after your essentials, but before you pay for anything else.


This one is self explanatory. This is any voluntary personal expense in english- fun money. Lifestyle is everything else that is left over, and lowest on the ladder of needs. The only rule that you have to follow here, is to keep these expenses at or below 30% of your take home income.

A few items you may find surprising in this category, may be, your phone, cable or internet bill.

I actually know a family that has gone 6 years without internet in their home, when their children need to do homework or research they use the computer at the library. I dont think I could do it, but good for them!

As important as our cell phones may seem to our quality of life, they are neither essential nor priorities.

Other lifestyle choices may include, gym fees, hobbies, pets, personal care, restaurants, charitable giving, and any other miscellaneous expenses. If your lifestyle dictates a $100 dinner out, then so be it, as long as it falls below 30%, you don’t have to feel guilty any more , you can afford it!


For the past while Ive implemented this outline into my budget and its been fantastic. It put my mind at ease knowing I didn’t have to put thousands of dollars away into a retirement account just to make Dave Ramsey happy.

In reality this budget IS flexible, I may have some beef with altering the minimum 20% because I feel it is so important, but regardless this is your money, and this is merely a framework to give you a sense of balance.

The 50/20/30 rule can help you master this term we call, personal finance. Start today if you haven’t already implemented a budget into your finances, and rather than being a hamster on a revolving wheel, you’ll put some ground underneath you and move forward.

I want to hear from you: How has a budget helped you? Did you find this article helpful?

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