What's Better? To Cut Costs or Boost Income?

[Retired To Win]

50% for needs, 30% for wants, 20% for savings. It comes from Elizabeth Warren's book I believe.

Thanks, Disneysteve...

I don't see how one can "arbitrarily" limit the funding of needs to 50% of one's income -- and then spend 30% of that income on wants.

It would make more sense to me, after being as non-sacrificially frugal as possible in the funding of one's needs, to then settle on a defined split of the remaining surplus between the funding of wants and savings. And in that position I would opt for saving a minimum of 50% of that surplus.

[feh]

Thanks, Disneysteve...

I don't see how one can "arbitrarily" limit the funding of needs to 50% of one's income -- and then spend 30% of that income on wants.

It would make more sense to me, after being as non-sacrificially frugal as possible in the funding of one's needs, to then settle on a defined split of the remaining surplus between the funding of wants and savings. And in that position I would opt for saving a minimum of 50% of that surplus.

I've never been much of a fan of the 50/30/20 plan myself, primarily because spending on wants increases as income does.

[disneysteve]

I've never been much of a fan of the 50/30/20 plan myself, primarily because spending on wants increases as income does.

That's true but you would also increase savings if you followed the percentages.

Nobody, including the author, says that you need to strictly adhere to the formula. If you want to do 20% to wants and 30% for savings and you're happy with the lifestyle that creates, that's great.

The problem is so many people are totally off track and spend 60 or 70% on needs and then wonder why they "can't afford" to save any money. If your mortgage is 45% of your income or your car loan is 25% of your income, you have a problem.

[Jerry91]

Both the options of cutting costs and boosting income are important. Both will go hand in hand. As you opt for budgeting, you will be able to get rid of your unnecessary expenses. Then you can opt for part time jobs. This will help you earn some extra money.

[Retired To Win]

Lifestyle Inflation Doesn't Have to Be a Given

I've never been much of a fan of the 50/30/20 plan myself, primarily because spending on wants increases as income does.

That's not a given. That's called lifestyle inflation. Going for the newer car, the bigger house, etc just because one can now afford it -- even though it's not going to serve any real life-improvement purpose.

This does not have to happen. It is not a given... not if one thinks it through and recognizes that increases in income can buy you the MOST valuable luxury of all: more time free from a job -- and sooner.

[LivingAlmostLarge]

Retiredtowin, I think that income in some cases does need to be boosted to have a certain lifestyle. I wasn't comfortable having kids and living off WIC and welfare. I could have had kids younger but I choose not to because of income. Even now income in some ways plays a role in not having more kids. And is it really lifestyle inflation?