A Budget for Every Life Stage

Budgeting is essential to managing finances efficiently and achieving financial goals.

Planning helps you navigate every stage of life by providing access to funds and resources needed to fulfil changing needs and aspirations.

The 50-30-20 budget rule is a popular budgeting method that divides your after-tax income into three categories:

• 50% Needs: This includes essentials such as housing, groceries, transportation costs, utilities, medical expenses, etc.
• 30% Wants: This has more variable expenses, such as eating out.
• 20% Savings: Anything to fulfil your investment goals

Tips for Deciding over your spendings:

Most of keeping a budget is about discipline, so starting by setting aside your money for savings and other categories can be the most difficult part, check out "How to create a basic budget" in this article but keep up in a mind the following considerations:

1. Establish a Needs Budget: Start by looking at your necessary expenses, then set aside 50% of your after-tax income for those categories. Considering the total amount of your budget, your needs spendings should be allocated like this:
   25% housing
     5% utilities
   10% utilities
   10% groceries
   10% transportation
   These categories will help you understand when you should take money from to pay for your life stage priorities.
2. Separate Your Wants: Determine which items you can live without and which you'd like to afford. Set aside no more than 30% of your after-tax income for these categories, and if you can spend less that’s a job well done.
3. Prioritize Savings: Once you have divided your needs and wants, save 20% of your income. We highly suggest using automatic transfers.

Let's review each chapter of life to break down budgets for every stage of life.

A Budget for When You're Living by Yourself

Perhaps the most important stage of your financial life

You'll likely find that following the 50-30-20 rule becomes harder when you live alone. Instead of 50-30-20, your budget looks more like 90-10, with most of your resources going towards living expenses and an occasional luxury purchase.

Once you know your essential living costs, try allocating some of your income towards financial goals, even if that means allocating 85-10-5. Investing $20 every month is better than nothing at all.

Another wise move is to set aside 20% towards goals automatically each month while paying your living expenses and then spend any remaining funds as desired.

Don't feel down if you can't allocate 50% towards goals right off the bat.

You will make mistakes but also learn a lot along the way.

A Budget for When You Live With Your Parents

This budget recommendation relies on someone taking charge of the living cost, so no rent or mortgage is included along with utilities costs, instead that money will go straight to your savings portion of your plan.

Now that 30% is now allocated in savings, many call this adjustment the inverted 50-30-20 rule, since now only 20% will go for your needs, 30% for wants and 50% for savings.

This action will help you make a great base for your future financial goals.

Millennials or Gen Z students who remain or return to their childhood homes for any reason—whether out of necessity or convenience—must build new habits to guarantee that they are appropriately equipped to remain independent when financial independence arrives.

Here's our recommended plan:

1. Set aside 20% for needs: To start, set aside 20% of your income for needs like food, energy, transportation, and health care.
2. Dedicate 30% to wants: Set aside 30% of your income for discretionary expenses that bring you joy.
3. Commit 50% for future goals: This can include an emergency fund, paying off student loan debt, saving for a house down payment, or investing for retirement goals.

This budgeting method should help you maximize living with your parents and set yourself up for financial success, especially for college students.

A Budget for Getting Married

Begin by estimating an affordable wedding within your financial means and calculating how much money needs to be saved for key dates, such as deposits for bands, venues, caterers, vendors, and your honeymoon costs.

Once you have set a timeline, you can reorganize your budget to allocate funds toward your wedding expenses. Below is an example breakdown:

Devote 50% of your income to the essentials, including healthcare.

10% can be allocated towards discretionary wants and expenses. This may include dining out, entertainment, shopping, and hobbies.

The remaining 40% should be directed towards saving for your wedding expenses, including deposits, venue rentals, decorations, and the honeymoon.

Communicating with your partner openly and honestly will be a key factor in the success of your wedding budget.

A Budget for living with your BAE

If you decide to move in with your partner, or if you tie the knot, while it's important to celebrate and enjoy your newlywed status, it's also crucial to stay focused on saving for future expenses.

Here's a suggested budget breakdown:

• Set a 37.5% budget for essential needs. Break it down into two parts:

25% is specifically allocated to general necessities like groceries, transportation, and healthcare.

12.5% can be set aside for housing expenses. Why? For what reason would you bring decimals to your budget? Why would you complicate this?

First things first, this is about proportions.

it doesn’t have to be exactly 12.5%, but this is half of the quarter allocated for living expenses, that you now share with your partner.

• Allocate 20% of your income towards discretionary wants and expenses. Enjoy dining out or other hobbies as you celebrate your marriage, the other 10% you will save for future financial goals.
• The remaining 42.5% should be directed towards savings for future objectives such as purchasing a property and starting a family.

This is an excellent time to navigate new financial responsibilities and have fun. So, be sure to plan accordingly and enjoy your new life together!

A Budget to Buy a House

To create a budget to buy a house or pay a mortgage, it's important to allocate your income wisely. Here's a suggested breakdown for buying a house:

• The first step is to allocate 25% of your income to groceries, transportation, and healthcare needs. The other 25% which is dedicated for living expenses will go directly for your house.
• Then allocate 10% towards discretionary wants and expenses like dining out, entertainment, shopping, and hobbies. You will sacrifice the other 20% for the payment of your house.
• You will keep saving 10% for other goals different from your new house and the other 10% will be used to pay your mortgage or save for your house.
• The remaining 55%, that includes what you set aside from the other accounts, should be directed toward your mortgage plan.

Buying a house requires discipline, so stay within your budget!

A Budget for Your Family

Having a family brings about a new stage in life that requires careful financial planning.

Here are some tips for a healthy family budget:

1. Increase your income sources.
2. Invest every dollar you save.
3. Reduce your spending.

This family budget plan can be beneficial for new parents:

• 50% should go towards necessities like household bills, minimum loan payments, and expenses associated with child care, including their college education.
• 30% for financial wants.
• 20% for savings and payments on toxic debts such as payday loans or credit card balances.

A Budget for When You Retire

All through your life, you should have had a retirement fund saved for this moment.

During the retirement stage, you should now rely more on your savings and passive income (assuming that you have done your homework) and less on your active income (if you desire to continue working in any manner).

In most cases, one may anticipate a cost reduction of between 70 and 80 percent when they retire.

You can simplify your retirement plan budget by following the 75/15/10 rule.

• 75% of your income should go toward expenses.
• 15% should go toward investing and saving.
• Once you have saved enough money for about six months of spending, put 10% of the money you would have saved into your budget for investment.

Everyone is Different

Some people prioritize retirement savings over debt repayment or saving for a significant purchase. Some desire a greater emergency fund, while others are willing to take more risks.

Consider your income, spending, financial objectives, and personal beliefs when budgeting. 

Keep checking back to our website, as we will continue to share more resources and insights into how you can create the perfect budget for your life stage.