Disclosure: I might have a slight shoe shopping problem! It isn’t like I’m ordering tons of shoes online and then forgetting or even choosing not to return them out of laziness. I go in search of specific shoes to round out my closet. I make time to drive somewhere and spend my money on shoes… in reality, I need them all (as the voice in my head rationalizes my wants.)

Rewinding a bit, the inspiration for this blog series initially came from my first week of working at Jacobi Capital Management. The literal wealth of knowledge that I absorbed during those first couple days was financially empowering, yet left me feeling quite frustrated. If I had just taken the time to sit down and listen to a few podcasts, read some blogs and had conversations with people in the industry I would have felt that learning about my personal finances was manageable. Something that I could have been doing 5-10 years ago when I was babysitting or had my first part-time job. Instead, I like many other young people categorize Finance as something too big and too complicated to even attempt to understand. However, I’ve learned recently it doesn’t have to be like that at all.

One of the impactful things I learned during my first week was that of the 50/30/20 rule. This rule or rather budgeting mindset is becoming quite popular as it simply breakdowns how one should budget while not being unrealistic to human wants and needs.

So, what does 50/30/20 stand for? Well first off it adds up to 100. But rather, it is 100% of your net income that one will use to help make a budget. For example, let’s say you are making $40,000 a year for your gross income, taxes are going to take away about $8,000 (roughly 15-25% depending on your state and local taxes), leaving you with roughly $32,000 as your annual net income. I find it easier to look at things on a month by month basis rather than annually, so let’s break it down further to roughly $2,700 monthly net income. (And also because I can’t rationally plan for the effects that the After-Christmas Sales will play into the demises of my initial annual budget.)

First, 50% of your net income goes to necessities. This includes rent or mortgage, groceries, utilities, transportation (to work), health insurance, etc. Then 30% of your net income goes to wants; here is where you have spa days, weekend gateways, sporting events, subscription plans (yes, Netflix is considered a want and not a necessity), eating out and of course- avocado toast. Lastly, the final 20% goes towards debts and savings, making monthly payments on student loans or contributing to your 401K.

Now for the reason that I like this rule: this mindset of budgeting makes room for your wants, but it also is structured to help you to feel more confident in being able to take care of your financial responsibilities. Having a plan of action can help you pay off debts or loans, save for a down-payment, or contribute to your retirement savings. Of course, everyone has different financial responsibilities and incomes. The 50/30/20 rule may not work for everyone, it is a starting point that can be adjusted or springboard you to a different ideology of budgeting that meets the needs of your life better.

In closing, life gets messy and following a budget can sometimes be difficult to maintain and become frustrating. However, I am learning the value of attempting to follow your budget can allow you to be a more thoughtful consumer and ultimately encourage you to set aside money for your future, which is where your money is most valuable.