Does the 50-30-20 Budgeting Strategy Actually Work? Vivian Tu Says Yes — Here’s Why

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Budgeting can feel overwhelming, especially when financial advice bombards you with complex spreadsheets, countless apps and endless rules. Enter the 50-30-20 budgeting strategy: A simple, straightforward framework that’s been gaining popularity for its ease and flexibility.

Vivian Tu, a personal finance expert and author of “Rich AF: The Winning Money Mindset That Will Change Your Life,” calls this approach a “quick finger-to-the-wind budgeting strategy.”

But does it actually work? According to Tu, absolutely — and here’s why.

What is the 50-30-20 Method?

Elizabeth Warren and Amelia Warren Tyagi popularized the method in their book “All Your Worth,” emphasizing its use as a foundational budgeting tool for people at various income levels.

The 50-30-20 method breaks down your after-tax income into three categories:

• 50% for Needs: These are essential expenses that you must cover to live and work, such as groceries, utilities, rent or mortgage, transportation, and insurance.
• 30% for Wants: This category includes discretionary spending such as dining out, entertainment, hobbies, beauty treatments, and other lifestyle choices.
• 20% for Savings: This is the portion that goes towards “today you taking care of future you,” allocated for savings, debt repayment, and investments.

The beauty of this method lies in its simplicity, which will help you stick to it. The CFP board found that having a budget can reduce anxiety and stress. Over 50% of consumers with a budget felt more confident, more secure, and more in control.

Yes, the 50-30-20 Method Still Works

Vivian Tu emphasizes that rather than a rigid rule, the 50-30-20 method is a starting point for budgeting.  When asked if these categories can be adjusted in today’s uncertain financial times, she says, “Absolutely.”

One of the key reasons the 50-30-20 method endures is because it’s designed to evolve with your financial situation. For example, as your income grows, Tu points out that you can increase the percentage allocated to the “future you” category (savings, investments, and debt payoff) while reducing the proportion spent on needs and wants.

Conversely, if unexpected expenses arise, you might temporarily shift your allocations to maintain balance. The key is to regularly review and adjust your budget to fit your financial reality. Small, gradual shifts will allow for sustainable financial growth without drastic lifestyle changes.

Can You Switch It Up? Absolutely.

Tu stresses that the 50-30-20 method is a “jump-off point,” not a prescriptive or overly rigid budgeting strategy. Life circumstances, income changes and personal priorities all influence how you should allocate your money.

For example, someone living in a high-cost city might spend more than 50% on needs, while another person might prioritize aggressive debt repayment and allocate more than 20% toward that goal.

But remember, the “wants” category is important for preventing budget fatigue. If you feel deprived of everyday pleasures, you’re more likely to abandon your budget altogether. Allocating 30% of income to discretionary expenses allows you to enjoy your life now while also saving for the future. This makes budgeting more sustainable in the long run.

That’s the beauty of the 50-30-20 method: This simple, flexible budgeting strategy provides guidelines for paying for what you need, what you want, and for your financial future, all in alignment with your personal priorities and financial goals.

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