The 50-30-20 budget plan

Have you ever found yourself out of money and realized, uh-oh, it’s only the middle of the week? Have you ever asked yourself where all your money went?

If you have, that’s not too surprising. After all, college costs run far beyond than just tuition fees. With food, transportation, and social expenses factored in, college life can be very heavy on your wallet.

Between students’ wants and needs, a clear strategy for budgeting money can be very useful— and maybe even necessary. This is where the 50-30-20 plan comes in. The 50-30-20 plan is a budgeting plan that divides money into three categories: 50 percent of your allowance goes to the essential needs, 30 percent of your money goes to lifestyle and socializing, and the last 20 percent goes to savings.

The 50-30-20 plan is a rule of thumb, not a written law, so the rule applies differently to most students, who don’t earn salaries yet. With your parents paying for most your essential expenses like housing and tuition fees, it’s possible to divert some of your money into savings and lifestyle. Here is how the 50-30-20 rule might apply for you.

Savings

It’s never too early to start saving up for long term goals. Whether it’s for a new cell phone or a trip abroad, saving is an integral part of your future plans. Although it’s the smallest part of the 50-30-20 plan, it is often considered the most important part because it secures your future plans.

Pay yourself first. Make sure that the first thing you do once you get your allowance is to set aside money for saving. What happens usually is that people procrastinate about saving, saying that “I’ll just save next time” or “I don’t really need to save now.” Because of this, people end up not saving at all, and miss their mark on their long-term financial goals.

Saving is not as simple as just storing money away for the future. You want your money to work for you, not just have it sit there collecting dust. That’s why investing money in a mutual fund or stocks is often a smart way to go about saving.

Needs

The biggest chunk of your allowance—that 50 percent—will go to day-to-day needs. For a student, this means food, transportation, and the occasional school supplies, though it’s not like you buy textbooks every month and maybe some of you don’t even buy books at all. Although most of your money will be allocated for food and transportation, that does not mean that you should splurge on every meal or take a taxi whenever you travel.

There are many restaurants around Taft for those on a budget. Most fast food places like McDo and Jollibee have a line of value meals that cater to those saving money. These value meals are often scaled down versions of their more expensive counterparts. Another place with great budget eats is Agno. With concessionaires that serve everything from siomai to fried chicken to belgian waffles, Agno is sure to serve whatever craving you may have, plus the food is much cheaper than most of the restaurants along Taft Ave. With meals costing around P70, Agno food is a great steal.

While it’s a lot easier to eat out, if you can, try to take something from home instead. It may not be as fresh and hot as the food around school, but bringing baon is a sure-fire way to save a huge part of your allowance—plus, it’s almost guaranteed to be healthier than the fried, occasionally greasy and fatty foods around school.

There’s no question, however, that transportation will end up taking some of that 50 percent. If you drive to school, this means paying for gas. If you commute, this means the daily bus, LRT, or jeep fare. The best tip we can give here is to figure out the cheapest way to get to school from where you are. Definitely, taking a taxi is the way of the privileged, not the desperate, so try using other forms of public transportation because cheaper is not always worse. In fact, more public forms of commuting may even be safer.

With cheaper alternatives to food and transportation, it may be possible to spend less than the 50 percent allocated for needs. What remains can then be allocated somewhere else—in this case, to your lifestyle budget, or better yet, to your savings.

Wants

Many students dream of living the “college life,” being able to go out and party, food tripping around the city, and generally having more freedom. Well, this section of the budget is exactly for that. The second biggest chunk your allowance will go to lifestyle. It doesn’t matter if you’re into rock climbing, cooking, surfing or just vegging out, the budget for all those things fall under your lifestyle budget.

Your lifestyle budget is also used when you want something pricier. For a student, that can mean watching a concert or going out on a date. The lifestyle budget is also the most flexible because it deals with your wants. Unlike your essential expenses and your savings, which can be difficult to reduce because they are generally fixed needs, what you spend for your wants is totally up to you.

However, this is where it gets a little tough. If you haven’t used up your 50 percent on needs yet, it’s tempting to add it to your lifestyle budget and splurge. This is alright to do once in a while (say, for that concert next month or your date tonight), but the toughest part of the 50-30-20 rule is limiting your wants, mainly because it allocates a measly 30 percent of your allowance to these. On the bad side, you may have to cut down on that trip to EK with your blockmates or going to UMall for some DOTA every day. On the bright side, if you put what’s left of your 50 percent into your savings, raising it from a 20 percent to a 30 or 35, who knows? In a few months’ time, you might just be able to buy that laptop or that smart phone you’ve really wanted and never knew you could afford.

The 50-30-20 rule of thumb in Real Life

Depending on your allowance and your living situation, the breakdown might go something like this.

Living Away from School (P1000/week)

A. Savings

• 10 percent= P100

B. Needs

• Meals: P85-100 x 4 days a week = P340-P400
• Transportation: (Trike + shuttle = P50) and (Jeep + LRT = 20)

= 120 x 4 days a week = 28

Total = P620 – P680 per week

C. Wants

Leisure/Entertainment = P220

Living near school/dorm(P1000/week)

A. Savings

20 percent of 1000 = P200

B. Needs*

Meals : P85-100 x 4 days a week = P340-P400

C. Wants

Leisure/Entertainment = P200

In general, saving is a pretty simple concept. The 50-30-20 rule is there to make things simpler, to transform your saving habits into concrete steps and plans. It even gives you the numbers in the hope that you’ll stick by them. However, like many things, saving is easier said than done. Our advice is to try the 50-30-20 rule out. More than that, though, we encourage you to start your saving habits today and see how much they benefit you not only now, but far into the future.