Avoid Using Elizabeth Warren’s Proposed (Personal) Budget Plan

This is certainly an extremely simple budgeting method.

Elizabeth Warren’s Proposed “50/30/20 Rule” For Simple Budgeting

Here’s how it looks, in terms of dollars for each category vs. your income.

Here’s how it looks, in terms of dollars for each category vs. your income.

How The 50/30/20 Rule Fails Einstein’s Admonition

One of my favorite quotes ascribed to Albert Einstein, “Every problem should be simplified as far as possible, but no further.”

Let’s count the ways it fails.

When Your Income Is Low

How The 50/30/20 Rule Can Hurt Your Finances

If your income is low relative to the cost of living in your area

The needs vs. wants differentiation is much less important once you make enough money.

When Your Income Is High

The Bottom Line – Do This Instead

When Your Income Is Low

If you earn less than a middle-class income, asking you to save 20% is a big ask.

When Your Income Is High

If your income is high, think about the level of risk you’re willing to accept vs. the freedom you’d feel

When Your Income Is In The Middle

If you have a middle-class income, the 50/30/20 rule may fit you about as well as it fits anyone.

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