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Many of you have already signed up to receive our free budget spreadsheet, but recently this new way of budgeting has caught my eye. It’s called the Balanced Money Formula created by Elizabeth Warren and Amelia Tyagi in their book, All Your Worth: The Ultimate Lifetime Money Plan.
The basic principle is that no more than 50% of your after-tax income should be spent on necessities, such as your mortgage, utilities, food, transportation etc. Then 20% should be put into savings and the remaining 30% should be spent simply on the things you want. Doesn’t that make things easy? Get Rich Slowly has a great further write up with charts, if you’d like to read more.
I will admit if you are a stay at home parent living on one income, having your needs only take up 50% of your take home money is tough. But keeping your spending in percentages is a nice way to work. Maybe at this point in your life 80% of your take home salary goes towards needs, 10% towards savings and 10% towards wants. Or 80% is needs, 15% wants and 5% goes towards savings. You can see how you can customize it for your current financial situation and as time goes on you can work towards the 50-30-20 principal.
I think this is a great concept because it makes living with in a budget much simpler and can’t we all use a little more simplicity in our busy lives? I also like how this method of budgeting gives you a generous 30% to spend on things that you simply want. As you know, I love to be frugal, but I also like to indulge in the occasional luxurious baby item or that seasonal pumpkin spice latte when the mood arrives.
How do your percentages look? What do you think of this budgeting method? If you are searching for the perfect easy to use budget spreadsheet, take a look over here.
Your budget sheet has been a tremendous help. Before i would forget a small bill here or there. Now i am budgeted until January with room to go in and revise if needed. thanks
I’m so glad it’s helped Deborah!