{"id":4302,"date":"2022-03-25T08:00:00","date_gmt":"2022-03-25T13:00:00","guid":{"rendered":"https:\/\/www.accrediteddebtrelief.com\/blog\/?p=4302"},"modified":"2024-02-28T11:41:17","modified_gmt":"2024-02-28T17:41:17","slug":"60-20-20-budgeting-is-it-the-new-50-30-20","status":"publish","type":"post","link":"https:\/\/www.accrediteddebtrelief.com\/blog\/60-20-20-budgeting-is-it-the-new-50-30-20\/","title":{"rendered":"The 60\/20\/20 Budgeting Rule and How It Works"},"content":{"rendered":"\n

The 50\/30\/20 budgeting rule<\/a>, made popular in the U.S. by Elizabeth Warren and Amelia Warren Tyagi, has gained mainstream attention since its debut in 2005. However, it\u2019s not the only percentage method for spending your earnings. On the other side of the globe, a similar formula has become incredibly popular: 60\/20\/20.<\/p>\n\n\n\n\n\n\n\n

How different are these two strategies, and which one is best for your budget? In this blog, we\u2019ll break down 60\/20\/20, compare it to the \u201cBalanced Money Formula,\u201d and help you decide which one to try first.<\/p>\n\n\n\n

Where Does 60\/20\/20 Budget Come From?<\/h2>\n\n\n\n

60\/20\/20 budgeting was made popular by Scott Pape, an Australian author and financial educator who\u2019s better known as \u201cThe Barefoot Investor<\/a>.\u201d<\/p>\n\n\n\n

In a 2016 article on budgeting<\/a>, Pape explains that he\u2019s never followed a strict budget. Instead, he suggests to his readers that they put 60% of their after-tax income towards living costs, 20% towards savings and 20% towards splurges.<\/p>\n\n\n

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The 60\/20\/20 Budget Breakdown<\/h2>\n\n\n\n

Living Expenses = 60%<\/h3>\n\n\n\n

Describing this portion of the budget as \u201cYou Inc,\u201d Pape describes living expenses as how much it costs you to \u201ckeep the lights running and the kids from drinking out of the dog\u2019s bowl.\u201d This includes things like housing, utilities, transportation, insurance and food.<\/p>\n\n\n\n

Savings = 20%<\/h3>\n\n\n\n

Noting that many people don\u2019t allocate enough for their savings, Pape recommends starting by saving $2,000 in what he calls a \u201cMojo account\u201d (this is basically an emergency fund<\/a>). Afterwards, 20% of your income should be used to pay off your debts one at a time. <\/p>\n\n\n\n

Splurges = 20%<\/h3>\n\n\n\n

Per Pape, this percentage should be put towards \u201cthings that make you smile.\u201d Nights out, vacations, hobbies and entertainment all fall under the splurge category. <\/p>\n\n\n\n

60\/20\/20 vs 50\/30\/20 Budgets – Which is Better?<\/h2>\n\n\n\n

These two budgeting strategies are incredibly similar. The biggest difference is a 10% shift between living expenses and splurges.<\/p>\n\n\n\n

Where is the best place for that tenth of your income to be spent? The answer will be different for everyone depending on their unique situation, but here are some considerations that can help you decide which category to prioritize:<\/p>\n\n\n\n

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60\/20\/20 may be better if…<\/h3>\n\n\n\n