Let’s face it: The task of starting a budget sounds about as exciting as an afternoon at the dentist. That’s because most people think it involves hours of entering all your expenses into a spreadsheet, followed by denying yourself anything fun that costs money.

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As it turns out, you can complete a budgeting exercise in much less time than you’d think — and still have room in your budget for things like dining out and concert tickets. Budgeting will also make it easier to save for mid-range goals, like an annual vacation or buying a home.

The 50/20/30 Rule provides an easy-to-remember framework when creating your budget. Begin with this as your guideline:

  • 50% of your income pays for your basic needs (housing, transportation, food, utilities, etc.)
  • 20% goes toward savings and debt repayment (savings includes both short-term goals like emergency savings and long-term goals like investing for retirement)
  • 30% pays for your wants (the fun stuff that is definitely important, but your survival doesn’t rely on it)

You can alter the percentages a bit based on your personal situation, but this is a good starting point.

Separating Needs From Wants

Here comes the most complicated part of this budgeting exercise: What is a need, and what is a want? And when does something you think you need begin to creep into “wants” territory?

Needs and wants are highly personal. Everyone needs a place to live, food, and transportation. But you might choose to not own a car so you can afford to live in a more expensive urban area, for example. Or you might limit restaurant meals to once a week because you want to save up for one expensive vacation a year.

A good question to ask yourself is, “What do I value?” Is it a spacious home? Close proximity to your job? Access to good public schools for your kids? Reliable internet access at home so you can start a small business? A close-knit community in your neighborhood? The things you value will shape where you spend your money.

And remember — no one else can tell you what to value! Make these choices based on what’s really important to you.

A Trick to Help You Save More

Starting a budget is one thing. Sticking to it is another. It’s easy to forget to move part of your money into different savings and investing accounts each month.

Thankfully, online banking and direct deposit can make it easier to stick to your budget. If your company allows for direct deposit of your payroll check, you can allocate a percentage of your take-home pay toward one or more savings accounts as it’s being deposited.

Or, if you’d prefer, you can set up automatic money transfers from your main checking account into various savings or investing accounts earmarked for different goals. The setup takes less than 30 minutes, and you’ll be less tempted to spend money if it’s whisked away to a separate savings account before you’ve even had a chance to notice it.

Variations on the Rule

Depending on your savings goals, you can deviate from the 50/20/30 Rule.1 If your goal is to retire early, for example, you might want to save much more of your income by lowering what you spend on both needs and wants. If you have a lot of debt, then you also may need to adjust the percentages.

You can also try a technique called “reverse budgeting.”2 With this system, you set money aside each month for needs and savings, and then you can spend whatever’s left as you choose. This technique can be great for anyone who finds budgeting to be too intimidating, or anyone who has trouble coming up with the money they need each month to pay their bills. By paying your bills and setting aside some savings first, you can freely spend on fun stuff, knowing that your necessary expenses and savings are already taken care of.


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