Budgeting: A Real World Example

I recently sat down and really, seriously looked at my household budget.

I’m finally at a point in my life where I want to change my financial outlook and am serious enough about it to put in the work. So, obviously, committing to a monthly budget is a good choice.

After reviewing several articles and my individual numbers, I’m wondering what planet these budgeting experts live on.

The 50-30-20 Budget

A very common idea is to live on 50% of your take home pay. It’s commonly known as the 50-30-20 budget.

This budget says you should live on 50% of your income, take care of wants with 30%, and save 20%.

When I read about this budgeting strategy I thought it sounded great. Then I looked at my own “real world” numbers.

My Real World Budget

Again, I don’t know what fantasyland planet these budgeting experts live on but I can’t even pay my rent on 50% of my take home pay.

For context, I am at the very bottom of what would be considered middle-class in my area. I am a single man with one job. I don’t have children. I don’t overspend on things like a place to live or the car I drive. I don’t frivolously spend money on going out and having drinks. I’m just a normal everyday guy making normal everyday money.

When I crunch the numbers, it takes a little over 80% of my take home pay to live.

That’s things like: rent, insurance, electricity, groceries and gas. 80% gone just for necessities.

Now, I do live in an area where housing costs are booming, but I live in a 1 bedroom apartment not in a trendy part of town.

I’m sure these “experts” would say I am spending too much on housing. But excuse me for wanting to live in a place that is convenient to my work and is relatively clean and safe.

As for the other necessities, I can’t go around without insurance on my car and my belongings. That’s not a smart way to live so that’s a non-negotiable. I can’t control how much it costs to keep my small apartment cool in the summer and warm in the winter so that’s not really flexible. I adjusted my grocery budget to eliminate certain extras, but you reach a point that if you’re going to be able to keep breathing you need a certain amount of food. Finally, you’re not going to keep earning a paycheck without gas in your car.

This is Why We Fail

I’m more than a little fired up about this because I think this contributes to why people fail at simple things like creating a household budget.

In certain situations, I’m sure the 50-30-20 budget is doable for certain people. But what about those of us who it doesn’t work for?

I’ve heard the response to this.

“You need to figure out a way to increase your income.”

Again, to the people who say this, what world do you live in?

If increasing your income was so easy more people would do it.

Some of us work very hard 40+ hour weeks at our full time jobs. We can’t just snap our fingers and suddenly take on another one.

A second job has to work around our full time job’s schedule. It has to pay enough to be worth the time and extra effort we’re committing to it.

My point is not that these ideas are impossible, it’s just not as simple as some would suggest.

Real World Answer: Cut Expenses

At this point, this is the plan I am using.

Out of necessity, I will be living on the 80-10-10 budget.

  • 80% Living Necessities
  • 10% Wants
  • 10% Savings and Investing

The most realistic things I can control right now are how much I pay for certain things.

  1. I can clip coupons and use digital deal codes.
  2. I can devote more time shopping for the best prices.
  3. I can eliminate monthly subscriptions that are not bringing me value.

In future posts, I let you know what I have found that works and what doesn’t.

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