This as-told-to essay is based on a transcribed conversation with Libby Brooks, 27, who lives in Wisconsin, about her budgeting journey. The following has been edited for length and clarity.
I began to budget after college when I had a significant amount of zeros in my bank account I hadn’t had before.
I started my first post-college job in January 2020 as a project manager in the power generation industry. The starting salary was $65,000. I previously worked as a bartender and waitress during college, so it was a salary jump.
When I started the role, I lived at home with my parents, so my expenses were low, and my disposable income was high. When COVID hit, I tended to shop online, overspending on clothes. I wasn’t taking inventory of the things I was buying or thinking about whether I actually needed them.
My behavior started to change around August 2020 because I wanted to move out of my parent’s house. Realizing how much I’d need for a security deposit and furniture made me want to get my finances under control.
My budgeting journey has evolved since I first started saving to move out. Four years later, I’ve been able to personalize my budget system to my financial goals and feel more in control of my debt and spending habits.
The 50/30/20 rule was an easy introduction to budgeting
When I first started to think about budgeting, I used a spreadsheet to keep track of what I was spending my money on and the amount. I read some personal finance books, which is how I came across the 50/30/20 rule.
The rule was very simple and easy for me to understand, like an equation. I could simply take the income that hit my bank account and divide it out into those different percentages. 50% of my income goes to needs, 30% on wants and 20% on savings.
Under my necessary expenses, I had $100 set aside every month for my dog’s expenses, including food and grooming. And later when I moved into an apartment with my boyfriend, I spent around $800 a month on rent. I commuted to work in my car and gas cost between $300 and $400 a month, I was also spending money on groceries and medical expenses.
Under non-essential expenses, I’d budget around $200 a month for dining out with friends and between $300 and $500 for shopping.
Within the 20% put toward savings, I typically contributed around $200 to my 401(k) and $100 to my emergency fund with every paycheck, so roughly twice a month.
I was able to move out of my parent’s house and into an apartment with my partner in January 2021. We split the security deposit and the first and last month’s rent equally between us. I saved 20% of my paycheck between August and December to afford to move.
I switched to the 50/20/20/10 rule to make room for my financial goals
I used the 50/30/20 rule until the end of 2021, but I started feeling frustrated because it seemed like I was running out of money every month.
I had been putting 20% into savings, but after learning more about personal finance, I wanted to spend more on my financial goals. I want to become debt-free by the time I’m 30, which means contributing more than my minimum monthly payment toward my car and student debt and putting more money into my emergency fund.
However, whenever I contributed over $100 to my emergency fund or any other financial goal in a month, I felt I was running out of money. I was putting all of my expenses, necessary and non-essential, on a credit card to gain the benefits of credit card points, but I would then have to pull money from my emergency fund for some months to cover this credit card bill.
I tweaked the rule to pay off my debt faster
I realized that the 50/30/20 rule didn’t really account for my financial goals of paying off debt.
I came across a TikTok creator talking about the 50/20/20/10 budgeting rule. For them, that meant allocating 50% to necessities, 20% to non-essentials, 20% to savings and 10% to investments. At the beginning of 2022, I decided to put my own spin on this method and use that final 10% for my financial goals, like saving and paying off my debts.
I switched jobs in April 2022, and my current salary is $109,000. Per month, I take home around $5,800. I budget $3,100 for necessities, $1,075 for non-essentials, $650 for savings, and around $960 for my financial goals bucket. That doesn’t break down exactly into a 50/20/20/10 framework, but I see the rule as more of a guideline.
I got engaged in February 2023, so I decided to use the 10% financial goals bucket on saving for my wedding instead of paying off debt. After my wedding, the breakdown may change.
I think it’s important to be flexible with your budgeting.
I’ve had to cut spending on shopping, but I feel better about my financial goals
Since switching to the 50/20/20/10 rule, I’ve felt less stressed. Previously, it was more challenging to prioritize financial goals, and it felt like I was going over budget, even though I could usually cover my expenses in the end.
Now I’ve increased my savings budget and decreased my unnecessary spending, I feel more confident in my finances. I set up an auto-deposit into multiple savings accounts, so it runs on autopilot, and I don’t have to think about it.
Right now, the focus is saving for my wedding, but with this budgeting system, I plan to pay off my student loan and car payments by 2027 and 2029. I have a full picture of where my money goes each month, so I know how much I can afford to throw at my debts to work toward a $0 balance.
I spent more on new clothes as my salary increased — around $800 to $1,000 monthly. Because I was factoring this into my 50/30/20 budget, I could afford it. Nowadays, I’m allocating $100 to $200 for shopping and using clothing rental services to save money.
Renting clothes gives me a similar feeling from shopping but it’s more sustainable and doesn’t crowd up my closet.
The great thing about personal finance is you can always make changes according to what fits best with your lifestyle.
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