Have you tried multiple budgets and given up in total failure? They’re too complicated. Or they don’t account for the fact you live in an expensive area? Luckily, there is a budget out there that is flexible and accounts for more expensive base costs than average. It’s called the 60-20-20 budget. Instead of having to track a hundred different categories, everything falls into one of three. Needs, wants, and savings. You have a certain percentage dedicated to each. This is a great budget for those just beginning to budget or are wondering to budget money. I’ve also included a free printable worksheet for you below!
If you find this post interesting, you might also be interest in: The 50-30-20 Budget, The Anti-Budget, and our Frugal Finance page.
I also have an entirely FREE Printable Budgeting Binder <<<click there to see what is included.
I also have an amazing product you might be interested in. Personal Money Management is more than just a book- it’s full of worksheets for you to work through so you can apply the financial advice to YOUR life. Take control of your finances today….check out Personal Money Management.
What is the 60-20-20 budget?
What exactly is the 60-20-20 budget? This budget was developed by Barefoot Investor Scott Pape. Click here to check out his book>>> Barefoot Investor. Scott suggests 60% of your income on essentials, 20% on wants (discretionary spending), and 20% on your financial goals. This budget works great for those who live in a costly area or have higher than normal commuting expenses. You don’t have to be perfect at first. You might need 65% towards needs, for example. But this budget gives you a starting place to get your spending under control and start some serious saving. Which is going to be vital in case of an emergency. Or in the long-term when you retire.
60% towards needs
60% of your after-tax income is dedicated to fulfilling your needs. This includes: housing, food,healthinsurance, utilities, auto payments/insurance, medication,basic clothing, etc. Note that the clothing is the minimum needed- shopping at thrift stores or cheaply for only what is needed.
20% towards wants
20% of your after-tax income is dedicated to wants. Wants are those that would be a minor inconvenience, but not impossible to live without. This includes: cable, dining out, entertainment (movies,videogames, music, books), vacations, and hobbies. In regards to clothing, shopping at a thrift store or for cheap for basic necessities falls under needs. Shopping at adepartment storeand beyond basic needs falls into the want category.
20% towards savings
It might be hard at first to adjust to a whole 20% towards savings. In that case, a smaller percentage is allowed. But only as long as your working constantly towards getting this up to the 20% it needs to be.
It might seem hard to allocate 20% towards savings. But Americans spend a vast amount of money on non-essential items. In fact, according to researchreported bythe New York Post, on average Americans spend $1,495 per month on non-essential items. But they still say they don’t have enough to put away for retirement.
As with all other budgets,savingscan fall into two categories: debt pay-down and building upsavings.
If you’re applying your 20%savingsto paying down debt, you need to commit to not building up more debt in the meantime.
If you’re applying your 20%savingsto building upsavings: it can include building up an emergency fund. I wrote a great article “Emergency Fund or Pay Off Debt” if you’re trying to decide which is more important for your particular financial situation.
Building upsavingsincludes your final goal: investments. You absolutely have to startsavingforretirement. Too few Americans aresavingforretirement. And the reason it needs to be investments (instead of just asavingsaccount) is that inflation is going up faster than your interest rate. So yoursavingsare actually SHRINKING by leaving it insavings. Start with an index fund. They follow the market and are a great long-term option for those who know little (or nothing) about finance.
60-20-20 Budget Example
How to budget your money. Here is an example. Let’s say you bring home $4,000 a month. $2,400 of that can go towards your needs- housing, groceries, etc. $800 of it goes towards your wants- cable TV, dining out, etc. And the last $800 goes towards savings, whether it is paying off debt, building investments, or both.
60-20-20 Budget Worksheet
60-20-20 Budget<<<click here to download.
Instructions:
• Print options: regular paper works.
• All of the files are in pdf below. Or click on the image. It will open in a new window and you can either print directly or save to computer.
• The default size of these is full-page. However, if you want smaller, simply reduce the print size! If you’re not sure on how much to reduce, check out my post “How to Resize Printables to Fit Your Planner.”
Wrapping it up
Some form of budgeting is necessary in everyone’s life. Unless your want to be forever broke. Americans right now- in general- are digging themselves into a hole of debt and the bill is going to come due. For those who hate budgets, the 60-20-20 budget is a great place to start.
Comment below letting me know what type of budget you use!
