50/30/20 Needs/Wants/Savings

I recently saw a rule of thumb about how you (everybody, because it’s a rule of thumb) should break down your paycheck. 50% to needs, 30% to wants, and 20% to savings. Those in the FI community scoff because only a loser would barely manage to set aside 20% of their savings, those in the rest of the world scoff because how the heck are you supposed to put 20% into savings?

I’m still confused about what people mean, exactly, when they say “savings rate,” but ours is somewhere between 13% and 32%. So, we’re probably maybe okay regarding savings. Maybe. I know, it’s never good enough, but we’re working on it.

But what about the rest? I’ve been thinking constantly about this. What is a need, what is a want? Are needs “food, housing, and transportation,” and wants everything else? What if I firmly believe (and I do) that children should be involved in music, art, and sports, for development? Is that a need? I mean, nobody’s dying without it. But nobody would die if we became homeless either, or if we spent 3 hours each way commuting to work using public transportation. Medical expenses are probably needs, but what about Tylenol when my head hurts? Taking care of dependent children’s needs is a responsibility, but do wholly dependent adults count? If MIL’s teeth are falling apart, is her dental care a need on my part?

Is having a pet a need? Having children? Spending time with family? Buying Christmas presents and Easter baskets?

What do debt repayments count as?

If I boil it down to what I think are defined as true needs (what we spend on housing, food, and transportation), we spend like 30% of our paycheck on needs. If I boil it down to “but no, really, I neeeeed this” (kid activities, all of MIL’s expenses, debt repayments, puppy having, holiday expenses), we spend like 70% of our paycheck on needs .

What are wants? True wants? Cocaine and prostitutes? The part of the trip to Disney World that we are going to pay for out of pocket? I guess if I’m thinking “what is frivolous,” maybe 10% of our paycheck goes to that.

At any rate, my needs/wants scale is apparently a spectrum and if you ask me on a morning when I stayed up too late the night before doing freelancing and my brain tumor scar hurts and I’m staring down the barrel of a full weekend of children fighting over whether the red umbrella or the blue umbrella is better and screeching because their sister has the one they want, I’m going to tell you that a Starbucks Caramel Machiatto is a need. Later that day, when I consider going on the lam and absconding all responsibilities, I’ll daydream about getting rid of it all and in that case, I need nothing except the clothes on my back.

New rule of thumb: save 20% and use the rest intentionally. Or save 13% or 32%. Or just make steps every day, or maybe every month or every year, to try to push that savings rate up higher and pay off debt. Can that be packaged in a cute little figure? No? Okay, fine. 50/30/20 it is.

2 thoughts on “50/30/20 Needs/Wants/Savings”

  1. Very nice deconstruction of the need/want continuum. It’s funny how we can be totally aware of the arbitrariness of number categories such as 50/30/20 yet still find a certain comfort in them. As an often overworked self-employed person, I’ve added another category for myself that has really helped me in terms of avoiding burnout: inspiration.
    Inspiration is anything that allows me to enjoy my work more, do a better job at it, and/or face the prospect of years or decades more of it with gratitude. Sometimes inspiration is “free,” like reading a great book or article or blog post or listening to a podcast (though we freelancers know that time spent is never exactly free because we could have been working and earning money during that interval). Other times it is expensive, like taking a cruise/hiking trip to Alaska or a trail-running adventure in Hawaii.
    Many people would say cruises or adventure trips to Hawaii are ridiculous expenses for someone who hasn’t yet reached FI, but these activities are things I look forward to through months of hard work. They allow me to feel gratitude for the work, because I know it is bringing me the ability to do something I truly love. So I have actually come to consider my inspiration budget as a kind of pre-tax “deduction” from my income. It is more essential even than “needs” because it is what allows me to keep chugging along and earning at a high rate for as long as I need to, and keeping that earning engine in good operating shape is the sine qua non of reaching FI.
    Anyway, hope you’re setting aside enough time and/or money for inspiration, because if you keep your high-earning attitude/ability in good shape over time then you’re going to provide for all your dependents and reach your goals just fine.


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