Budgeting is an important aspect of controlling your finances. But no budget will work if you don’t stick to it. That’s why the 50/20/30 rule works for some people, but it needs a slight modification…
The 50/20/30 rule divides your budget into three categories. It’s meant to simplify the budgeting process. This probably isn’t the most optimum method because the categories are too broad, but the point of the method is to make the process simple enough that a family will stick to it:
But there’s good news: You don’t need complicated spreadsheets with countless spending categories, and you don’t need to be a financial expert to understand how much money you can spend. You simply need to follow the 50-20-30 Rule.
This article explains that there are three categories. The largest at 50% is for living expenses and essentials, like rent/mortgage, utilities, gas, and groceries. The article doesn’t mention it, but term life insurance needs to be in here, too.
Thirty percent of your income should be for flexible spending. That includes all the things you want, but don’t necessarily have to have. That would be vacations, dining out, going to movies, sports camp, and other non-essential items.
The final 20% category is for financial goals. Lumped within this category are debt-reduction payments, savings, and investments.
A MAJOR MISSING COMPONENT
But what’s missing from these three categories is the tithe: 10% of your income should be returned to God. He possesses a legal claim on that 10% of your income. This can be loaded into the 20% category if you desire.
Most people don’t have a lot of extra money for retirement savings. Beyond that, most retirement plans are bad ideas anyway. Investing in the stock market or mutual funds is good for the fund managers who collect annual fees for simply managing the money, whether you post a net gain or net loss for the year or not. If they were serious, they’d only require payment in the form of a percentage of gains. But most don’t. That’s because they’re not really concerned about increasing your retirement portfolio as much as they are collecting a 1% or 5% annual percentage in management fees.
For church congregation members who come to their deacons for financial counseling, or who come with a relief request, the deacons may want to consider recommending this method of budgeting. It’s a good start, and it’s simple to manage. You will want to graduate to more in-depth forms of budgeting as soon as you can–I recommend immediately. But in situations where the deacons are strapped for resources and time, this method beats nothing at all.
You can probably skip the retirement savings. Retirement is a myth for most people anyway. In the 20% category, 10% should go to God in the form of a tithe. Always. If the family or member should have any hope at all succeeding in taking control of their finances, they need God on their side, not on their backs. The other 10% can be divided between savings and debt reduction.
Retirement savings, in order of priority, comes after these other basics have been accounted for.