50-30-20 Approach to Budgeting

As of 2025, around 57% of Americans are living paycheck to paycheck, and 72% of Generation Z (14-29 years old) alone fall into this statistic. Learning to properly budget during a difficult time in America can ensure that you have a stable plan to fall back on when things go south, and learning the 50/30/20 is a classic method for prioritizing the expenses necessary to manage your life. 

Step 1: Calculate Net income

Your net income is the amount of money left over after paying taxes, interest, and mandatory costs. In order to calculate this, you would take your gross income and subtract mandatory taxes (FICA, Federal, State, Health Insurance, etc.)

Step 2: Track Spending 

Many modern-day phone applications make it simple to track your regular spending and monthly subscriptions. In other instances, people track spending using spreadsheets through Microsoft Excel, ledgers, and other physical trackers to ensure they are spending within their means. These tracking strategies review every expense so that you are clear about where your money is going in order to set a realistic budget.

Step 3: Establish a Budget

There are numerous options for tested budget approaches; however, the most common tool is the 50-30-20 principle. The 50-30-20 principle simply offers a way to organize your expenses into three categories: 50% going towards needs (rent, mortgage, utility bills, groceries), 30% going towards wants (subscriptions, takeout, movies), and 20% going into your savings account, emergency fund, or debt payoff. This method allows you to consistently save money while prioritizing your needs and wants into respectable categories that limit your spending. 

Step 4: Complete the Circles Financial Literacy Program

Circles offers individuals an 18-month program for financial literacy encouraging people to move towards self-sufficiency. Joining the cohort would allow you to better understand how to navigate your finances and lean on your Circles Ally whenever you need support.

Step 5: Stick to it & Adjust for Inflating Prices

Sticking to a budget isn’t always easy, and there will be times that you tread the line between staying within and spending beyond your budget, especially during a time when inflation is making everyday life difficult. Circles offers supportive services and knowledge of community resources to help you navigate tough financial times and get back on your feet. Get involved with Circles today to begin your journey towards self-sufficiency!