Page 11 - Equity Movement Magazine-Issue2
P. 11
BUDGET RESOURCE
The 50/30/20 Rule of Thumb for Budgeting
Elizabeth Warren's 50/30/20 rule can help you
manage your budget.
Paula Pant
ou’ve reviewed your spending and created a So how does the 50/30/20 plan work? Here’s how
budget, and now you know exactly how much Warren and Tyagi recommend you organize your
Yyou spend on your home, your car, discretionary budget.
spending, and how much you divert to your retirement
accounts. That’s all good, but what about your other Step One: Calculate Your After-Tax Income. Your after-tax
savings, such as for an emergency? How does your income is what remains of your paycheck after taxes are
financial allocation compare to the amount you taken out, such as state tax, local tax, income tax,
should ideally spend and save? Medicare, and Social Security.
If you’re an employee with a steady paycheck, your
Harvard bankruptcy expert Elizabeth Warren—U.S. after-tax income should be easy to figure out by
Senator from Massachusetts and named by Time checking your paystubs. If health care, retirement
magazine as one of the 100 Most Influential People in contributions, or any other deductions are taken out of
the World—coined the “50/30/20 rule” for spending your paycheck, add them back in.
and saving with her daughter, Amelia Warren Tyagi.
They co-authored a book in 2005: “All Your Worth: The If you’re self-employed, your after-tax income equals
Ultimate Lifetime Money Plan.” your gross income less your business expenses, such as
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