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Yahoo
12-04-2025
- Business
- Yahoo
Americans Are Ditching the 50/30/20 Budget: How They Actually Split Their Paychecks
The 50/30/20 budgeting rule has long been the gold standard. According to this budgeting rule of thumb, you should devote 50% of your after-tax income to needs, 30% to wants and 20% to savings. Check Out: Learn More: However, many Americans do not actually stick to this rule. A recent Talker Research and EarnIn survey of Americans who earn $75,000 a year or less found that the average respondent put 64% of their income toward needs, 16% toward wants and 16% toward savings. Here's why Americans are ditching the 50/30/20 budgeting rule — and why this might be a mistake. While the 50/30/20 budget may be a helpful guide, it won't work for everyone's budget. 'At the end of the day, you don't have to stick to any particular budgeting rules like the 50/30/20 rule, as long as you find a way of creating and managing a budget that works for you,' said Erika Kullberg, personal finance expert and founder of 'While that study shows some budgeters follow a similar, but different method than the 50/30/20, they could benefit from focusing more on saving and less on wants.' The biggest issue, however, is that many Americans are having to devote too much of their budgets to 'needs.' 'The key here is to lower those ongoing expenses that can weigh down your budget each month,' Kullberg said. 'Small things like shopping around for new car insurance quotes and canceling the bulk of your entertainment subscriptions can add up. You need to find ways to lower your essential spending so more money can go toward savings goals or paying off debt each month.' Bobbi Rebell, CFP and personal finance expert at agrees that devoting 64% of income to needs and less than 20% to savings is not ideal. 'The question for each person is: How do you define needs?' she said. 'It might make sense to go through and think about how they might redefine needs if they lost their job — would everything still stay in that 'needs' bucket? Could they pull just 4% into the savings bucket? If not, could they aim to do 1% more each month until they get to 20%?' However, Rebell acknowledges that the 50/30/20 budget may simply not be feasible for everyone. 'The split reflects the tough reality for many Americans in what is a very expensive inflationary environment,' she said. 'In other words, given the circumstances, this is just how it is for so many Americans who are trying so hard to make ends meet. 'It is also important to note that 16% in savings isn't that far off from a goal of 20%,' Rebell continued. 'The 'wants' is where this theoretical person is really cutting back, and it would be tough to ask them to cut back even more.' Read Next: If your goal is to get as close as possible to the 50/30/20 guidelines, there are some steps you can take to get there. 'There are two basic ways to approach it — redefine what goes in each bucket or increase income, because the 'wants' bucket is already below optimal,' Rebell said. 'It [might] make sense to reframe some needs. A good example might be a gym membership. We might define it as a 'need' because we want to stay in shape, but in reality we can exercise for free. 'The other way to move the needle is to increase income and dedicate that additional revenue to boosting savings first, and then increasing the amount dedicated to wants.' More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for RetireesHow Far $750K Plus Social Security Goes in Retirement in Every US Region7 Overpriced Grocery Items Frugal People Should Quit Buying in 202525 Places To Buy a Home If You Want It To Gain Value This article originally appeared on Americans Are Ditching the 50/30/20 Budget: How They Actually Split Their Paychecks
Yahoo
12-04-2025
- Business
- Yahoo
Most Americans Making $75K or Less Have Overdue Bills: 2 Ways This Wrecks Your Finances
Keeping up with bills is challenging, and many Americans are falling behind. A recent Talker Research and EarnIn survey of Americans who earn $75,000 or less a year found that 55% have between one and four overdue bills during any given month. Find Out: Read Next: While having overdue bills may be the norm, this behavior has both short- and long-term consequences. Before skipping a payment, here's what you need to know about how this can affect your finances. Missing a bill payment can add to the amount of money that you owe in the form of added fees and additional interest. 'In the short term, you are going to be wasting money that you could be saving by paying late fees and potentially interest on those overdue bills,' said Bobbi Rebell, CFP and personal finance expert at 'In fact, some credit card companies increase your interest rate with a late bill.' It can also impact your mental health. 'Having constant overdue bills and feeling like you are playing catch-up takes a huge toll on mental health and may literally keep you up at night,' Rebell said. 'That's a terrible way to live.' Check Out: Having consistent overdue bills can negatively impact your credit score. 'Over the long term, not only can it severely impact your credit score, it can also drag down your ability to accomplish your financial goals,' Rebell said. 'Once a bill is more than 30 days overdue it can be reported to the credit agencies. That lower score will hurt your ability to get loans — including mortgages — and if you do get approved, it can mean you are getting less favorable terms.' When you have overdue bills, it can feel impossible to catch up, but with proper planning it's possible to get back on track. The first step is determining which bills to pay first. 'Understand that not all bills are of equal importance,' Rebell said. 'Take the time to go through them and understand the consequences of paying each of them late. For example, some bills do not have any financial consequences for 30, 60 and even 90 days. 'Some, like credit cards, have serious financial consequences in that if you don't pay on time, you not only get hit with late fees, you also will pay interest on the overdue amount, and usually on any current charges as well,' she continued. 'That's an expensive delay!' You also need to consider the impact of each unpaid bill. 'For example, paying a utility late could result in a loss of service at some point,' Rebell said. 'Use this information to prioritize which bills to pay if you have to make that decision.' Next, call your lender or providers and see if there is any room for negotiation. 'In some cases, for example with some medical bills, you can negotiate a lower balance or a deferred payment schedule,' Rebell said. 'Credit card companies will sometimes let you adjust the payment date, so be sure to ask. Also with some bills, such as mortgages, the due date may be the first of the month, but there is no penalty as long as you pay it by the 15th.' If you are consistently struggling with overdue bills, you may need to reassess your overall budget. 'That might mean cutting back on anything you can, even if it is just until you clear your bills,' Rebell said. 'It also might mean asking for a raise, if that is possible, or taking on some side hustle work to boost your income. At the end of the day, you have to make the math work by changing the numbers rather than just trying to keep up in an exhausting effort to pay unaffordable bills.' More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for RetireesHow Far $750K Plus Social Security Goes in Retirement in Every US Region7 Overpriced Grocery Items Frugal People Should Quit Buying in 202525 Places To Buy a Home If You Want It To Gain Value This article originally appeared on Most Americans Making $75K or Less Have Overdue Bills: 2 Ways This Wrecks Your Finances
