- We talk about budgeting all the time on this show,
I know, I know, but the thing is,
is that a lot of people get confused
when it comes to budgeting,
because there are different ways you can budget.
So people have different philosophies
and the way they like to budget.
But really, I believe in one,
which we'll talk about at the end of this.
And you've heard it before,
but there's a budget out there called the 50/20/30 budget
that a lot of people love.
They think it works really well.
Listen, it's actually not a great way to budget.
So those of you that have never heard
of the 50/20/30 budget, here's what it is:
50% of your income goes to your needs.
So your food, your shelter, utilities,
transportation, insurance, daycare.
I mean, anything that is your need, 50% of your budget,
no matter what goes to it.
20% of your budget goes to saving and paying off debt
or staying current with your debt, some people would say.
20% of your income goes there.
30% then goes to your wants.
So this could be going out to eat.
This could be shopping, fill in the blank,
whatever your wants are, 30%.
Now the upside to this budget is like,
oh, that makes it really easy.
No matter what, this is what I do with my money.
This is where it goes,
this is what's going on, no matter what.
So that makes it like, oh, simple, okay, yeah, guess what?
Simple keeps you broke, people.
Yeah, no, it's not good
because it is so simple in the fact, meaning
that it is stagnant no matter where you are.
So if you have like $100,000
in student loan debt,
50, 20, 30, you're debt-free building wealth, 50, 20, 30.
No, that is not how it should be.
Your budget should live and breathe with you
depending on what's going on.
So here's a couple of reasons
why I do not like the 50/20/30.
Number one, kind of like what I said,
that no matter where you are, it is the same,
and that's not good for your money situation.
You have to be able to change your budget
depending on where you are financially.
Number two, it does not account for giving, okay?
Giving, we always talk about,
there is nowhere in giving that it's in there,
I don't like that.
Number three, it does not focus
on your goals or your progress,
meaning that wherever you are financially.
So let's say that you don't have any savings,
you have lots of debt.
Well, what I wanna say to you
is that you are gonna look at your budget,
and you need to take out any amount of money
that you have, cut places, add places,
whatever is possible to squeeze out as much money,
to get $1,000.
Once you have that starter emergency fund,
then you're gonna go and pay off debt.
So those of you paying off debt, you know,
to sacrifice, sacrifice your lifestyle, sacrifice your time,
whatever it takes to get out of debt, you do it.
So if that means that your budget is 30% of needs,
everything else has being thrown at the debt.
That's a good thing. You really wanna stay focused.
Because focused intensity, we say around here, over time,
multiplied by God, equals unstoppable momentum.
Having that momentum to get out of debt is so, so crucial.
So again, the 50/20/30 budget,
it's the same thing, no matter what.
But when you're getting out of debt,
you're building your emergency fund.
I want sacrifice to be shown in your budgets.
Number four is that the 50/20/30,
a lot of money is going toward your wants.
30% of your income.
And listen, when you're focusing on your wants,
that's what's gonna can we keep you
living paycheck to paycheck.
And so to say, what do I really need in life?
That's what's gonna help you break down the budget,
to say, you know what?
A lot of my money's being spent on wants,
and that's what's ended up being my life right now,
that I don't like that, but you wanna change.
So saying, you know what,
no matter what, I'm gonna have to look at my budget,
being very, very specific.
And that 30% of my money may not go to wants,
and that's okay.
So again, for general reasons, why I'm like,
no, you really don't want the stagnant budget
for the rest of your life.
You wanna be able to change.
So when the times that you need to sacrifice,
I want to see that math in your budget showing sacrifice.
And then on the flip side, when you are winning with money
and you don't have debt, you have an emergency fund,
I want the budget to reflect that as well
for you to be able to live like no one else
and your budget show that.
So again, it's not always about the math
and the 50/20/30, that's what they focus on.
And your motivation to win with money
is not just math based.
It is in what you choose to do,
your behavior with your money.
So your budget, again,
should reflect where you are financially.
So that's why I love the zero-based budget.
Zero base-budget is your income
minus all of your expenses equals zero.
So every dollar coming in is assigned to a category.
Now, when I say expenses, I also mean giving and saving
in that as well.
But what this does is that you're not
locked into certain percentages.
You can just say, you know what?
Here is what I need to spend money on.
And that's your Four Walls: food, shelter,
utilities and transportation.
That's gonna go at the top
and then everything else you're gonna have to prioritize
and say, okay, what do I need right now in this month?
What do I want this month?
And again, if you're getting out of debt,
you're building an emergency fund,
those wants are gonna be cut down,
but that's okay, that's okay.
This is you being in control of your money
and being focused on this is what we have to do to win.
Again, not some formula that's out there,
but really what reflects your reality and where you are.
And also with the zero-based budget,
when you're doing it correctly,
you're tracking your expenses.
And what this does is this really reflects
and shows you, okay,
here's what I've done so far this month,
and here's what I have left.
It really gives you accountability in each category.
So when you do the zero-based budget, you guys,
make sure you are tracking your expenses.
It makes no sense. Like, make a budget
and be like, well, here it is.
But to actually live on it
and say, okay, no,
I'm actually going to follow my transactions,
put them in and say,
this is exactly what I have left in each category.
This is going to help you win with money in the long term.
And as I always say, this is the part of the budget
where it gives you permission to spend.
Where you can go and do things in the budget
without feeling guilt or shame
or you're questioning every purchase that you're making.
So tracking those transactions in a zero-based budget,
I promise we'll get you winning in no time with money.
So to do that, which is really easy.
If you sign up for Ramsey+,
which is our brand-new all-access membership,
it gives you so much content in there.
EveryDollar is in Ramsey+, so you can start using it.
I get that little app on your phone, just click away.
I promise, I mean, I cannot tell you
how much I hated budgeting,
and then when EveryDollar came in the picture
and I actually started using it,
it's amazing what it does.
Like it gives you permission to spend.
It gets you in control of your money.
And that's what I want you guys to do. I really, really do.
So make sure you sign up for Ramsey+ today
to start budgeting.
Because again, no, no, 50/20/30 here, no, no, no.
Zero-based budgeting is the way to go.
You guys, I promise that it will get you
in control of your money today.
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