A lot of budgeting starts at the edges and works in cut back here” and trim over there.” That’s a little like planning a diet by saying cut out cookies” and no sugar in your coffee.” This approach may (or may not) work for slight modifications, but it is not a comprehensive lifetime plan. And if you don’t have a master plan, then trimming a few expenses in one place while you overspend elsewhere won’t do you any more good than cutting out doughnuts while you gorge on cupcakes.

We start by approaching money in a whole new way. No complicated lists. No spending diaries. Instead, (…) analyze your spending by dividing it into three simple categories.

There is one category for your regular monthly bills.
A second category for the money you spend just for fun”. And a third category for savings.

Those three categories make up the 50/30/20 budget:

50 percent of your money goes toward needs, or Must Haves (housing, transportation, food, bills).
30 percent goes to discretionary spending or Wants.
20 percent goes to Savings.



January 1, 2020