Personal Budget Templates
50–30–20
October 29, 2023
What are some useful budget templates?
Running Point and I were asked similar by Sheryl Nance-Nash at Mind Body Green for her article, “What Is The 50–30–20 Budget Template? Experts Explain Everything You Need To Know,” regarding how to budget well for your physical, mental, and emotional health.
Common budgeting strategies
Common personal budgeting strategies include the 50/30/20 rule and the zero-based budget. The 50/30/20 rule suggests allocating 50% of income to necessities, 30% to discretionary spending (wants), and 20% to savings or debt repayment. The zero-based budget involves allocating every dollar of income to specific expenses, savings, and debt repayment, with the goal of having zero leftover at the end of each month.
The envelope method used to be a common budgeting technique, but since it involves physically dividing physical cash into envelopes labeled for different expenses — such as rent, groceries, or entertainment — it has fallen out of favor in an electronic world of Venmo, Zelle, Paypal, automated payments, and debit and credit cards.
What is best for you?
To determine the best budgeting method, you should consider your income, spending habits, financial goals, and level of discipline. It may be helpful to try different methods to find a one that is sustainable and trackable.
The basic steps to creating a budget include:
1. Track your income and expenses for at least one month
2. Categorize expenses into fixed (necessities) and variable (discretionary)
3. Identify areas where expenses can be reduced
4. Set financial goals or priorities, especially if you want to make adjustments over time
5. Allocate money towards necessities, discretionary spending, and savings
6. Review and adjust your budget as needed
Avoid mistakes
Just as important as having a budget is avoiding some common budget mistakes such as: underestimating or not accurately tracking expenses, confusing needs with wants and not prioritizing your spending accordingly, not allowing for unexpected expenses that may arise such as car repairs or medical bills, not optimizing your debt repayment or your savings, not adjusting your budget as circumstances change, using credit cards to overspend, comparing yourself to others financially, and being too restrictive with spending which can lead to feeling deprived and potentially giving up on your budget altogether.
Balancing expectations and priorities is important.
Article quote is below:
How do I get started?
“First you want to get a sense of where you are,” says Michael Ashley Schulman, founding partner and chief investment officer at Running Point Capital Advisors. To do that, track your income and expenses for at least one month. Categorize expenses into fixed (necessities) and variable (discretionary). Identify areas where expenses can be reduced. Set financial goals or priorities, especially if you want to make adjustments over time.
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC ( Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23–110
