Three Ways to Get Started
Let’s put one myth to bed right now—budgeting isn’t easy, at least not at first.
Budgeting means sitting down and writing out a plan. It takes time and energy to accurately assess how much money you have and where it goes. If you’ve been flying by the seat of your pants—spending a little bit here and a little bit there and hoping everything will just sort itself out—the very thought of so much foresight and discipline can feel overwhelming.
But here’s the truth: Making a plan helps you make the most of your hard-earned savings.
Senator Elizabeth Warren shares her secrets to mastering finances in her book “All Your Worth: The Ultimate Lifetime Money Plan.” Warren maps out the 50/20/30 budget rule to help you manage your money, and save for emergencies and retirement. “The secret?” she writes. “It’s simple, really: get your money in balance.”
Divide up your after-tax income—and make a simple budget.
It’s as simple as:
Spend 50% on your needs.
Spend 30% on your wants.
Put away 20% in savings.
Here’s an example:
Let’s imagine your family’s after-tax income is $65,000—which is hovering just above the median household income in the United States. Here’s how you could apply the 50/20/30 budget rule:
Needs: $32.5K of after-tax income or $2,708 per month
Just the basics.
Rent or mortgage payments
Minimum debt payment
Wants: $13K or $1,083 per month
These are all the things that aren’t essential — but make life enjoyable.
New clothes, shoes, jewelry, bags, beauty products, etc.
HBO, Netflix, Prime subscriptions
Dinner and movies out
Toys and gifts
Savings: $19.5K or $1,625 per month
Allocate 30% of your after-tax income to savings and investments.
Add money to an emergency savings account — consider setting aside three months of living expenses or more.
Contribute to an IRA or 401(k).
Invest your money with a robo-advisor or financial advisors.
Debt repayment — while minimum payments are part of the "needs" category, any extra payments reduce the principal and future interest owed. Simply put, they count towards savings.
A more simplified approach to household finances is bucket budgeting. You consider which “buckets” need to be filled—think bills, essentials, and so on—and then whatever is left over can go into optional buckets, like investments, entertainment, or extra payments on debts (if you’re feeling extra responsible).
If our $65,000/year household is using bucketing budgeting, each bucket would only be filled by how much money it needs rather than by percentage of income. It might look like this:
Bills Bucket: $2,500 per month on rent, utilities, debt payments, and healthcare.
Essentials Bucket: $1,200 per month for food, clothes, and toiletries.
Savings Bucket: $1,000 per month for your rainy day fund or investments.
Fun Bucket: Everything else can be allocated here to fund everything else, from eating out, going to the movies, or subscriptions to streaming services.
The 60% Solution
While the other two methods focus on balance, this solution takes a more sweeping approach. Here, 60% of your income is dedicated to monthly commitments—everything from your mortgage to your television subscriptions. The other 40% is split into four equal categories:
Long-term savings. This would be your emergency savings (preferably in a high-yield savings account) and stock options.
Short-term savings. This is money you would spend and replenish again throughout the year on things like vacations or unexpected expenses.
Fun. This is exactly what it sounds like—10% of your income can be allocated for those lazy nights when you would rather order out than cook.
Whatever You Choose—Stay Consistent
Having a plan and sticking with it allows you to cover your expenses and save for retirement—while still prioritizing the activities that make you happy. Plus it reduces financial stress. Ready to get started? Share your journey with your Hive.
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Have you tried budgeting in the past? What worked? What didn’t?
How do you balance “needs” and “wants” in your life?