Personal budgeting & how most people get it wrong…intentionally.
If you have spent any time in social media groups, you have probably come across some interesting threads about personal finance. The threads contain main titles like “Who Pays The Bills?” or “Should I Pay Half?”. In short order, most of the underlying threads descend into battles of Men vs. Women as well as The Selfish & Stingy vs. The Lazy & Entitled. They get even more chaotic when the pick-me types & clout chasers join in and try to win points with their crushes. But there is one unifying factor that ties all those factions together…most of the people in these threads suck at personal finance & adulthood in general.
This debate is rooted in the mid-20th Century nuclear family paradigm. This is where the husband is the bread winner and the wife is the homemaker. In so far as maintaining a stable family unit, this paradigm has work well for decades. This is regardless of the socio-economic status of the couples maintaining said households. In the 21st Century, people still see this as the optimal practice for their households and there is nothing wrong with it. But that shit started going out the window the late 1960’s and the household dynamic became more complex.
By the mid 1970’s, it wasn’t uncommon to see a two income household where husband and wife had some sibilance of a work-life balance. The household expenses is where the 50/50 argument gets on shaky ground. Many still say the man of the house should pay for the household needs. But these same people say that the woman of the house gets free reign to spend her earnings any way she pleases. Others will argue that it should be divided evenly by the total household expenses…which is NOT a fair household budgeting practice.
Unless both people are making exactly the same salary, 50/50 on total household expenses is NOT a level playing field. The person who makes less is going to have a larger burden on their spending power than the person who makes more. But there is a fair personal budgeting method that will work for the household expenses…it’s 50-30-20.
The 50-30-20 budget breaks down like this:
• 50% of your income is set aside for your needs like rent, insurance, utilities, etc.
• 30% of your income is set aside for your wants like entertainment, gadgets, gaming, etc.
• 20% of your income is set aside for savings & investments (stocks, ETFs, etc).When both individuals are practicing the 50-30-20 method, they both dedicate half of their personal income to the household expenses. This puts less of a burden on their buying power…individually & together. Both can have relatively healthy buying power for their wants while maintaining the household expenses. This is fair and when practiced properly, there is less chance of worrying about bills….which should be an after thought after a certain amount of life experience.
Unfortunately, too many people aren’t looking for fair nor sensible budgeting…they’re looking to get over. They’re looking for the “financial freedom” to live a lifestyle that is above their individual earnings. On a side note: Expecting anyone you’re dating to “help” you with debt that you created is an unreasonable expectation. But that’s a topic for another discussion. Stay excellent my friends.