50/30/20 Rule | QLC #006

I follow a lot of financial influencers on social media. Business owners, high net worth individuals, personal finance YouTubers, and people who sell courses (gross).

As a listener/watcher/follower I find all of the advice helpful but hard to relate to my current situation. Most of these influential figures talk about saving 75% of your income or using the FIRE method to retire by 30. While those things are possible, they’re not exactly easy to digest as someone who’s just starting their career and planning their 1st budget.

There is too much information overload today. Take a small bite with 50/30/20 first.

Understanding 50/30/20

It’s a simple breakdown of your gross income. 50% toward necessities. 30% toward discretionary spending. 20% toward savings.

For some reason $45,000/year is this magical number that college grads want to make in their 1st year out of school so let’s use it for this example.

50% toward necessities = $22,500/year | $1,875/month.

30% toward discretionary spend = $13,500/year | $1,125/month.

20% toward savings = $9,000/year | $750/month.

That’s it. Focus on this and achieve it during your 1st year of your career. Begin to understand your financial habits early.

Simple But Hard

Here is a small breakdown of the average costs of things per month in Michigan:

Rent: $1,000 | Car: $300 | Insurance: $100 | Gas: $200 | Phone: $100 | Groceries: $300 | Student Loans: $300 |

Total: $2300/month

*All necessity costs shown are the averages from studies/research conducted in the State of Michigan

You’re going to be over-budget. Savings suffer first.

Crucial to Your Future Success

Live by this rule for the 1st year of your career you’ll set yourself apart from nearly every single one of your friends. It’s not a competition but rather a matter of comfort.

Emergency fund? Flexibility in your daily spending? 3-day weekend trip to Chicago to visit some friends? 50/30/20.

The 20% you put toward savings accomplishes all of these things. Accidents happen, cars get flat tires, you lose your wallet, etc.. Having a baby emergency fund creates peace of mind. Priceless.

Your Financial Habits Begin Early

You learn a lot about your spending habits when you’re focusing on 50/30/20. I don’t care what you spend your money on, I care about creating habits that yield a massive ROI for the years to come.

As a millennial who started their career 2 years ago I’m incredibly happy I committed to 50/30/20 early on. Some months are incredibly hard but that emergency fund looks so sexy in my account.