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The 411 On The 50-30-20 Rule

You can still live your best life while on a budget.

Finance

"Deprivation".

"Restrictions".

"Boring".

All of these words constantly ran through my mind when I first tried to get my finances in order and implement a budget. I had so many failed attempts because, for one, I was making my budgets super unrealistic and, two, I cringed at just the thought of having to even be on a budget. I just didn't get why I needed one. So quite naturally, I was unable to make it a consistent habit.

Fast forward a few years later, I started to grasp the concept of a budget much better. I'd attribute that to mindset shifts as well. I realized that a budget was simply just a spending plan and that I didn't have to strip all of the things I loved and enjoyed doing in order to be successful with budgeting.

You can still live your best life while on a budget.

I didn't have to give up brunch with my girls or have to compromise my style. Once I implemented budgeting into my life, I was actually able to do MORE of the things that I enjoyed simply because I was much more responsible with my coins and knew where everything was going. I also cut out things from my life/expenses that did not serve me any longer and that I didn't value.

That's why I can appreciate the 50/30/20 rule when it comes to budgeting. It's simple, realistic, and doesn't deprive you of those things that you love while taking care of business. Let me break it down for you.

The 50/30/20 rule is simply this:

  • 50% of your income goes to your needs
  • 30% of your income goes to your wants
  • 20% of your income goes to your savings and other goals

See, simple right?

Here's how you set a solid foundation and get started with implementing this rule into your lifestyle.

Analyze spending habits

First, it's imperative that you analyze your spending habits prior to establishing this budgeting rule.

Most people spend more money than they think they are actually spending. Additionally, they don't really know where their money is going. You need to analyze your spending habits in order to get down to the nitty gritty. Taking time to really dig into your accounts will help you when deciding where you want to allocate your coins with the 50/30/20 rule. It's super hard to get your financial life in order if you don't know where your money is going.

Make sure you are taking a close look into the discretionary spending that you are doing. These expenses are those that vary from month to month, to include:

  • Eating Out
  • Clothing
  • Groceries
  • Going Out/Entertainment
  • Transportation

Ask yourself, "Am I doing the most with my spending, or nah?" Keep it 100!

Determine your actual needs (50%) vs. your wants (30%)

Additionally, many people have trouble sticking to a budget because they find it hard to determine the difference between true needs and wants.

Needs are items that you must have for basic survival/daily living. For example, food, housing, clothing, transportation, insurance, etc are all needs.

Wants are items you desire, but can live without. For example, travel, entertainment, hobbies, eating out, memberships, etc are all wants.

To determine if an item is a need or a want, picture yourself living without it. What consequences would occur if you didn't have that item in your life? Would those consequences have a significant impact or would you just miss the item? Being honest about the difference between a need and a want is a critical step towards smart budgeting.

Using the rule of 50% towards needs and 30% towards wants, actually allocate your income accordingly.

Identify savings and other financial goals (20%)

Once you've gotten clarity on where you're spending your money and identified your needs and wants, you then need to figure out what you want to accomplish with the remaining 20% of your income.

Here's a few questions to get you going:

  • How much do you want to contribute to retirement?
  • How much do you want to contribute to your emergency fund?
  • Do you have any debts you want to pay off? How much extra do you want to contribute to reach those goals?
  • Do you have any other investment goals? How much do you want to invest?

This is the roadmap for the 50/30/20 rule. Here's a quick example:

MONTHLY TAKE HOME PAY: $3,200

NEEDS: $1600

Rent $1,000

Utilities $150

Transportation $100

Food $200

Insurance $150

WANTS: $960

Travel $400

Eating Out $150

Nails $50

Apple Music $10

Netflix $10

Gym $10

Hair $130

Sneakers $200

SAVINGS/GOALS: $640

Emergency Fund $90

401K $150

Debt Payoff $400

The most important step comes with the implementation and execution.

Once you determine how much and where, it's time to actually put it to use and see how it works for you. The fact that it's easy to use and to get started with regardless of your income is an advantage of using this method. Additionally, you'll be able to shape bomb money management habits without having to do too much while simultaneously saving for your future. I also love how it's super flexible and you can adjust everything to fit your lifestyle and income increases over time.

One con of this method is that it may not be realistic for those whose expenses are over 50% of their income. If that's the case, you can determine if there's anything you can cut out or bring in additional cash if needed.

This framework should allow you to get a better grasp on your money management and grow your savings in the process. Just like with everything else, you have to find what works best for you and stick with it in order to see results.

Do you subscribe to the 50/30/20 rule when you budget? What are some of your tips for effective budgeting?

Featured image by StellrWeb on Unsplash

ACLU By ACLUSponsored

Over the past four years, we grew accustomed to a regular barrage of blatant, segregationist-style racism from the White House. Donald Trump tweeted that “the Squad," four Democratic Congresswomen who are Black, Latinx, and South Asian, should “go back" to the “corrupt" countries they came from; that same year, he called Elizabeth Warren “Pocahontas," mocking her belief that she might be descended from Native American ancestors.

But as outrageous as the racist comments Trump regularly spewed were, the racially unjust governmental actions his administration took and, in the case of COVID-19, didn't take, impacted millions more — especially Black and Brown people.

To begin to heal and move toward real racial justice, we must address not only the harms of the past four years, but also the harms tracing back to this country's origins. Racism has played an active role in the creation of our systems of education, health care, ownership, and employment, and virtually every other facet of life since this nation's founding.

Our history has shown us that it's not enough to take racist policies off the books if we are going to achieve true justice. Those past policies have structured our society and created deeply-rooted patterns and practices that can only be disrupted and reformed with new policies of similar strength and efficacy. In short, a systemic problem requires a systemic solution. To combat systemic racism, we must pursue systemic equality.

What is Systemic Racism?

A system is a collection of elements that are organized for a common purpose. Racism in America is a system that combines economic, political, and social components. That system specifically disempowers and disenfranchises Black people, while maintaining and expanding implicit and explicit advantages for white people, leading to better opportunities in jobs, education, and housing, and discrimination in the criminal legal system. For example, the country's voting systems empower white voters at the expense of voters of color, resulting in an unequal system of governance in which those communities have little voice and representation, even in policies that directly impact them.

Systemic Equality is a Systemic Solution

In the years ahead, the ACLU will pursue administrative and legislative campaigns targeting the Biden-Harris administration and Congress. We will leverage legal advocacy to dismantle systemic barriers, and will work with our affiliates to change policies nearer to the communities most harmed by these legacies. The goal is to build a nation where every person can achieve their highest potential, unhampered by structural and institutional racism.

To begin, in 2021, we believe the Biden administration and Congress should take the following crucial steps to advance systemic equality:

Voting Rights

The administration must issue an executive order creating a Justice Department lead staff position on voting rights violations in every U.S. Attorney office. We are seeing a flood of unlawful restrictions on voting across the country, and at every level of state and local government. This nationwide problem requires nationwide investigatory and enforcement resources. Even if it requires new training and approval protocols, a new voting rights enforcement program with the participation of all 93 U.S. Attorney offices is the best way to help ensure nationwide enforcement of voting rights laws.

These assistant U.S. attorneys should begin by ensuring that every American in the custody of the Bureau of Prisons who is eligible to vote can vote, and monitor the Census and redistricting process to fight the dilution of voting power in communities of color.

We are also calling on Congress to pass the John Lewis Voting Rights Advancement Act to finally create a fair and equal national voting system, the cause for which John Lewis devoted his life.

Student Debt

Black borrowers pay more than other students for the same degrees, and graduate with an average of $7,400 more in debt than their white peers. In the years following graduation, the debt gap more than triples. Nearly half of Black borrowers will default within 12 years. In other words, for Black Americans, the American dream costs more. Last week, Majority Leader Chuck Schumer and Sen. Elizabeth Warren, along with House Reps. Ayanna Pressley, Maxine Waters, and others, called on President Biden to cancel up to $50,000 in federal student loan debt per borrower.

We couldn't agree more. By forgiving $50,000 of student debt, President Biden can unleash pent up economic potential in Black communities, while relieving them of a burden that forestalls so many hopes and dreams. Black women in particular will benefit from this executive action, as they are proportionately the most indebted group of all Americans.

Postal Banking

In both low and high income majority-Black communities, traditional bank branches are 50 percent more likely to close than in white communities. The result is that nearly 50 percent of Black Americans are unbanked or underbanked, and many pay more than $2,000 in fees associated with subprime financial institutions. Over their lifetime, those fees can add up to as much as two years of annual income for the average Black family.

The U.S. Postal Service can and should meet this crisis by providing competitive, low-cost financial services to help advance economic equality. We call on President Biden to appoint new members to the Postal Board of Governors so that the Post Office can do the work of providing essential services to every American.

Fair Housing

Across the country, millions of people are living in communities of concentrated poverty, including 26 percent of all Black children. The Biden administration should again implement the 2015 Affirmatively Furthering Fair Housing rule, which required localities that receive federal funds for housing to investigate and address barriers to fair housing and patterns or practices that promote bias. In 1980, the average Black person lived in a neighborhood that was 62 percent Black and 31 percent white. By 2010, the average Black person's neighborhood was 48 percent Black and 34 percent white. Reinstating the Obama-era Fair Housing Rule will combat this ongoing segregation and set us on a path to true integration.

Congress should also pass the American Housing and Economic Mobility Act, or a similar measure, to finally redress the legacy of redlining and break down the walls of segregation once and for all.

Broadband Access

To realize broadband's potential to benefit our democracy and connect us to one another, all people in the United States must have equal access and broadband must be made affordable for the most vulnerable. Yet today, 15 percent of American households with school-age children do not have subscriptions to any form of broadband, including one-quarter of Black households (an additional 23 percent of African Americans are “smartphone-only" internet users, meaning they lack traditional home broadband service but do own a smartphone, which is insufficient to attend class, do homework, or apply for a job). The Biden administration, Federal Communications Commission, and Congress must develop and implement plans to increase funding for broadband to expand universal access.

Enhanced, Refundable Child Tax Credits

The United States faces a crisis of child poverty. Seventeen percent of all American children are impoverished — a rate higher than not just peer nations like Canada and the U.K., but Mexico and Russia as well. Currently, more than 50 percent of Black and Latinx children in the U.S. do not qualify for the full benefit, compared to 23 percent of white children, and nearly one in five Black children do not receive any credit at all.

To combat this crisis, President Biden and Congress should enhance the child tax credit and make it fully refundable. If we enhance the child tax credit, we can cut child poverty by 40 percent and instantly lift over 50 percent of Black children out of poverty.

Reparations

We cannot repair harms that we have not fully diagnosed. We must commit to a thorough examination of the impact of the legacy of chattel slavery on racial inequality today. In 2021, Congress must pass H.R. 40, which would establish a commission to study reparations and make recommendations for Black Americans.

The Long View

For the past century, the ACLU has fought for racial justice in legislatures and in courts, including through several landmark Supreme Court cases. While the court has not always ruled in favor of racial justice, incremental wins throughout history have helped to chip away at different forms of racism such as school segregation ( Brown v. Board), racial bias in the criminal legal system (Powell v. Alabama, i.e. the Scottsboro Boys), and marriage inequality (Loving v. Virginia). While these landmark victories initiated necessary reforms, they were only a starting point.

Systemic racism continues to pervade the lives of Black people through voter suppression, lack of financial services, housing discrimination, and other areas. More than anything, doing this work has taught the ACLU that we must fight on every front in order to overcome our country's legacies of racism. That is what our Systemic Equality agenda is all about.

In the weeks ahead, we will both expand on our views of why these campaigns are crucial to systemic equality and signal the path this country must take. We will also dive into our work to build organizing, advocacy, and legal power in the South — a region with a unique history of racial oppression and violence alongside a rich history of antiracist organizing and advocacy. We are committed to four principles throughout this campaign: reconciliation, access, prosperity, and empowerment. We hope that our actions can meet our ambition to, as Dr. King said, lead this nation to live out the true meaning of its creed.

What you can do:
Take the pledge: Systemic Equality Agenda
Sign up

Featured image by Shutterstock

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