{"id":355869,"date":"2018-05-09T07:00:35","date_gmt":"2018-05-09T13:00:35","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=355869"},"modified":"2022-03-29T21:13:32","modified_gmt":"2022-03-30T03:13:32","slug":"how-to-pay-down-debt-with-the-50-30-20-budget","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/finance\/how-to-pay-down-debt-with-the-50-30-20-budget\/","title":{"rendered":"How to Pay Down Debt with the 50\/30\/20 Budget"},"content":{"rendered":"

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The 50\/30\/20 budget is a basic budgeting methodology developed by Elizabeth Warren in her book \u201cAll Your Worth: The Ultimate Lifetime Money Plan.\u201d This strategy was created to help those new to saving money by categorizing expenses into three basic buckets: Needs, Wants, and Savings\/Debt. The idea is that by compartmentalizing expenses, individuals can gain control of their spending.<\/p>\n

Many budgeting plans are overly-convoluted and depend on exhaustive spreadsheets or in-depth bank account review. The 50\/30\/20 budget is an easy way to not only keep your finances on track, but also adequately plan for the future.<\/p>\n

50 percent: Needs<\/strong><\/h2>\n

According to this budgeting plan, half of your income should go to the essentials (and no, that morning latte doesn\u2019t count). These items include rent, house payments, groceries, insurance, etc.<\/p>\n

The most difficult part of this budgeting plan is determining what is a need. Do a gut check, and assess whether forgoing a product or service will have a minor or significant affect on your life. If it\u2019s the latter, then it\u2019s safe to say it\u2019s a need.<\/p>\n

For example, while a credit card payment might seem appropriate for the want or debt categories, it can actually be considered a need. If you were to lapse on the minimum card payment, you would seriously damage your credit score \u2014 this has vast-reaching financial consequences and could necessitate credit repair services.<\/a> You need<\/em> to pay your minimum debt payments or run the risk of lasting financial detriment, so this cost belongs in this category.<\/p>\n

Determining what is a need can get confusing, but remember that it\u2019s a large category \u2014 hence the 50 percent allotment. While 50 percent seems like a lot at first, remember that it includes more than you might first think.<\/p>\n

30 percent: Wants<\/strong><\/h2>\n

Oh boy, 30 percent? Now we\u2019re talking! Think of all the frivolous purchases you can make with the financial backing of almost a third of your paycheck \u2014 you could practically outfit a whole wall with flat screens with that amount of dough.<\/p>\n

Well, not so fast. Much like the previous category, the wants portion of your budget includes a lot more expenses than you might expect. In addition to luxuries such as a tropical vacation or expensive electronics, less lavish wants might include your phone bill, streaming services, dinners out, shopping, and much more.<\/p>\n

If you\u2019re honest with yourself, you probably spend far more than 30 percent of your income on wants. It might be time to scale back wants in order to make room for the last, most often overlooked, category: savings\/debt.<\/p>\n

20 percent: Savings\/Debt<\/strong><\/h2>\n

The overall goal of this budgeting plan is to make room for the (sometimes unpleasant) act of saving and paying off debt. Many of us put off these expenses because, put simply, they\u2019re not much fun. But, that doesn\u2019t mean they\u2019re not important.<\/p>\n

Once again this is a relatively broad category and up for interpretation, but popular examples of savings or debt payments include:<\/p>\n