Last time we explored cash flow - money in and money out. Now let's put that knowledge to work with a simple budgeting framework!

The 50/30/20 rule is one of the most popular budgeting methods because it's straightforward and flexible.

Engagement Message

Have you heard of this rule before?

Here's how the 50/30/20 rule works: you divide your after-tax income into three buckets.

50% goes to needs, 30% to wants, and 20% to savings and debt repayment. Think of it as three financial priorities.

Engagement Message

Which bucket sounds most challenging for you to stick to?

The 50% "needs" bucket covers your essential expenses - things you must pay to maintain your basic lifestyle.

This includes rent, utilities, minimum debt payments, groceries, insurance, and transportation costs. Non-negotiable stuff.

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What's your biggest need expense each month?

The 30% "wants" bucket is for discretionary spending - things that enhance your life but aren't essential.

Dining out, entertainment, hobbies, streaming services, and shopping fall here. This is your fun money with boundaries.

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What want do you spend the most on?

The 20% "savings and debt" bucket builds your financial future. This includes emergency fund contributions, retirement savings, and extra debt payments beyond minimums.

This bucket is what creates long-term financial security and wealth.

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Which feels more urgent - building savings or paying debt?

Let's see this in action: Maria earns $4,000 monthly after taxes.

50% (needs) = $2,000, 30% (wants) = $1,200, 20% (savings/debt) = $800.

She allocates her spending to stay within these limits.

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Would a 50/30/20 split work for you?

The beauty of this rule is its flexibility. If you have high debt, you might do 50/20/30 to pay it off faster.

Low expenses? Try 45/25/30 to boost savings. The key is finding percentages that work for your situation.

Engagement Message

How might you adjust these percentages for your life?

Type

Swipe Left or Right

Practice Question

Let's practice categorizing expenses! Swipe each expense left if it's a NEED (essential) or right if it's a WANT (discretionary).

Labels

• Left Label: Need (Essential)
• Right Label: Want (Optional)

Left Label Items

• Monthly rent payment
• Grocery shopping for meals
• Car insurance premium
• Minimum credit card payment
• Phone bill for communication

Right Label Items

• Netflix subscription
• Weekly coffee shop visits
• New workout clothes
• Concert tickets
• Dining out with friends