The 50/20/30 budgeting system is one of the easiest and most effective budget strategies to follow. Under this method, 50% of your post-tax income goes to needs, 20% to savings or investments, and 30% to wants. Your biggest percentage should always go toward essential needs like housing, bills, and groceries. This is the easiest category to define. But the other two categories are a bit more ambiguous.
By now, we’ve all seen the updates outlining the details of the coronavirus stimulus checks that should be coming in the next few weeks. These checks will provide relief to millions of Americans that are suffering financially right now, but it’s important to maximize the stimulus and make the most of it so it doesn’t disappear without a trace.
Once you know your essentials are covered, for the time being, the “wants” section could use some attention, too.
The “wants” section of your budget is all about the fun or exciting things that you want to spend money on because they make life more enjoyable. As such, things like subscription services, eating out, the latest mystery novel, and day trips all fall into this category. While constant COVID updates are ramping up our anxieties, it’s okay to give yourself permission to spend a bit on yourself, too – just be careful not to overdo it.
The economic stimulus check should be focused primarily on catching up on your needs, but the wants come next, especially since we’re all stuck at home for the time being. Make the most of your subscriptions by canceling the ones that you don’t use and trying out a new and versatile one that offers the exact types of content you enjoy. Many streaming services are offering lengthy trial periods right now, so you can test them out before you make a decision. And if you aren’t using your gym memberships (even when gyms are open), box-of-the-month clubs, etc. (who needs Stitch Fix when everyone is living in their sweatpants) now is the time to make a decision to start using your membership, delay a renewal, or cancel altogether. Set a calendar reminder for a day or two before the trial runs out so you don’t end up with a whole bunch of unwanted monthly charges.
Many restaurants and small businesses are suffering as a result of the toll that the coronavirus has taken on our economy. If you enjoy frequenting local restaurants or shopping from particular mom and pop shops in your area, consider using some of the economic stimulus check to offer a small amount of support to them. We wouldn’t recommend ordering delivery every night for a month, but thoughtful and careful financial decisions will help you obtain a sense of normalcy while also benefiting local restaurant and shop owners.
While many restaurants are closed, many others are still offering delivery, pickup, and curbside options. You’re supporting someone who needs it and you don’t have to cook tonight; it’s a win-win. If you’re stocked up on groceries or your favorite local restaurant isn’t offering delivery right now, consider buying a gift card now so you can treat yourself to a night out later. Experts agree that local spending, even as little as a few dinners at a time, can really make a difference in injecting funds back into the economy.
The coronavirus outbreak has temporarily halted the possibility of many normal activities, like going to work, seeing a movie at your local theater, going to happy hour at a favorite bar or restaurant, and catching up with friends in person. When everything goes back to normal, some time away may be just what we need. Whether this day or weekend trip includes your significant other, children, friends, or family, this can be an excellent opportunity to catch up and bond after an unanticipated amount of time spent apart. You may even find that you can book something now as many hotels and airlines are offering significant discounts towards future travel.
Set some money aside to fund the reunion - you’ll be happy you did later. And in the meantime, we can all spend this early spring organizing our homes, reading good books, and avoiding debt and overspending with free or cheap DIY projects. The COVID-19 economic stimulus package gives us all the opportunity to catch up on our needs while sparingly supporting our wants and setting a small amount aside for investments. And speaking of investments, we’ll talk more about that category in your 50/30/20 budget soon. Check back in next week for our deep dive into the investments category of your budgeting system.