Why ignoring the 50/30/20 budget rule was best for me


Personal Finance Insider writes on products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners like American Express, but our reporting and recommendations are always independent and objective.

  • Many money experts recommend the 50/30/20 budget, where 50% of your income is spent on needs, 30% on needs, and 20% on savings and debt.
  • I decided to give it a try, but it didn’t really work – it led to self-doubt, decision fatigue, and frustration.
  • Instead, I ignored the 50/30/20 budget and set up my own “cash flow” system with separate accounts for different goals.
  • Having separate accounts for saving, spending, and paying bills meant I had less work each month and I didn’t have to worry about going overboard in a single budgeting category.
  • Using my cash flow system has saved me money on impromptu road trips and fancy dinners while building a $ 20,000 emergency fund.
  • Check out Business Insider’s recommendations for the best high-yielding savings accounts »

Just as fitness fans like to experiment with different exercise programs and diets, as a money nerd I’ve tried pretty much every budget imaginable. From the zero-sum budget where every dollar has a task and is settled, to the debt-free budget where you pay yourself first and then spend the rest – whatever.

I also tried the popular 50/30/20 budget. Here you allocate 50% of your income to your needs or fixed expenses, 30% to your wishes or variable expenses and the remaining 20% ​​to your debts and savings.

While it is often touted as an effective way to manage your money, that didn’t sound right to me. In fact, ignoring the 50/30/20 rule was the best thing I’ve done to put more money in my emergency fund.

The 50/30/20 rule leads to frustration

On paper, the 50/30/20 rule sounds like a great idea. But for me, following these rules only led to feelings of frustration and anxiety.

If I couldn’t keep my expenses within these three neat categories, I felt like I was failing. And these feelings of self-destruction have kept me from keeping up with the budget.

Budgeting with the 50/30/20 rule felt time consuming

In addition, every month I felt like I had to keep track of every issue and adjust my budget. I found myself asking questions like, “Will mine

Car insurance
Premium tip my “Needs” category this month? “And if I had one-off expenses – like during the holidays, or if I spent more on” Wishes “while selling or visiting friends, I got nervous when I over I spent the allocated money out 30% of my income.

I have a ‘Cash flow system instead

Instead of sticking to the 50/30/20 budgeting rule, I created my own “cash flow” or system of linked accounts to help me save. While it took a bit of work upfront to set it up, in the long run creating a flow of money has resulted in less time spent budgeting and arguing about day-to-day spending decisions.

I keep a main checking account to which my entire salary is paid and where I pay my bills. From there, my money will either be transferred to a separate savings account or a separate checking account. I use the separate checking account to store my freely available pocket money, cash that I use to pay for groceries, household items, clothes and going out. My separate savings account has different “buckets” for different goals, including saving for a computer, vacation, and buying a new car.

When I had a regular job and had a steady paycheck, I put the same amount in my savings account every month. When I switched to freelancing, I started throwing away a percentage of what was left after I covered my basic living expenses. This is how I stay on track to meet my savings goals.

My cash flow system reduced decision fatigue and helped me save

With this system, the only number I really had to keep track of on a regular basis was the amount I had in my checking account for daily expenses. As long as I kept my weekly limit, I didn’t need to tap into my savings account.

More importantly, if, in a given month, I was spending, say, food or clothing a little more, I didn’t have to feel bad. At the end of the day, as long as I met my money goals, I could assign the rest without worrying too much about sticking to certain categories.

With my cash flow system, I was able to build a $ 20,000 emergency fund. I also have separate savings that I can use when I go on a spontaneous road trip, spend a little extra at a restaurant, or use it when I have a low income month. I treat my emergency fund like a kind of “golden cow” that should not be protected or “slaughtered” under any circumstances. I definitely couldn’t do that with the 50/30/20 system.

Sometimes what’s popular doesn’t always work for you. I’ve found that figuring out your own way of managing money can take a little trial and error. There’s no one-size-fits-all solution, so you’ll need to do a little research to see exactly what is holding up and what is effective.


Leave A Reply