The 50/30/20 Budget Rule of thumb

9 months ago my wife and I welcomed our first child into the house and boy has it been a lot of fun.

Every week it seems like there is a new milestone.

Rolling over.
Rocking back-and-forth.
Learning out to crawl.
Then standing with support.
Then walking along furniture.
Then standing without support.

I know that a lot of people have gone through this, but that doesn’t change the wonder and excitement that it brings me and my wife.

But there are also other developments that are not so fun.

Now that he crawls, he’s into everything (and I mean everything… who knew vent covers were so interesting).

He has also started to recognize our corrections.

When he crawls towards the dog, we tell him no.
When he crawls towards the dog bowl, we tell him no.
When he crawls towards the bath or tub, we tell him no.
When he starts opening cabinets and pulling out dishes, we tell him no.

Slowly, we’ve seen him develop a reaction to the meaning behind these words. At first it was confusion and getting teary.

But now, it has turned into acknowledgment and continuing on his course.

While a 9-month old is limited in how he can disobey, older children aren’t.

So, why is that? Why are we driven to the edge of what’s allowable?

There is an innate desire in us to know what our boundaries are.

We’re all looking for those lines.

Some, when they reach the line, stop and don’t approach again. Others continue to test the line.

In the same way that kids test their boundaries to see what’s out there, adults like boundaries as well. Sure, some like them more than others, but it’s important nonetheless to establish them.

This is very often true where people lack confidence in an area, which is true in finances.

That brings us to the 50-30-20 Budget.

The idea is this: spend 50% on needs, 30% on wants, 20% on savings.

This has been adopted in business too: 50% on essentials, 30% on personal development, 20% on goals.

This framework is powerful because it gives you a rule of thumb to follow.

There is no magic to these numbers, so feel free to adjust them as you may.

But there is magic in following a rule of thumb.

So think: what rule of thumb could you establish, in work or life, that would help make decision-making just a little bit easier?

Reply to this post and let me know what you come up with.

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