Lesson 47: The 50/30/20 Rule Of Budgeting

​Lesson Plan & Other Important Documents

Lesson Plan

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​Notes: What Is a Budget & How to Use One

Why People Struggle With Money

• Some people earn good money but still end up broke.
• Many professional athletes go bankrupt after retirement.
• The problem isn’t always lack of income — it’s spending money unwisely.
• People often overspend on things they don’t need.
• When emergencies happen or big goals arise (house, retirement), they don’t have enough saved.

What Is a Budget?

• A budget is a plan to track:
  • How much money you make (income)
  • How much you spend
  • What you spend it on
  • How much you save
• Helps you make better decisions about your money.

Example Income

• Monthly income (allowance + part-time job): $2,000.

The 50/30/20 Rule

A common budgeting rule used by professionals:

• 50% Needs
• 30% Wants
• 20% Savings

Savings (20%)

• First priority: take savings out before spending.
• From $2,000 → $400 goes directly into savings.
• Only use your savings for real emergencies or major goals.
• Savings can be for retirement, emergencies, or future expensive items.
• Thinking long-term is important.

Needs (50%)

• From $2,000 → $1,000 for needs.
• Needs = necessary expenses:
  • Adults: housing, groceries, medical bills.
  • Teens: clothes, lunch money, sports equipment, car costs.
• Must come before wants.

Wants (30%)

• From $2,000 → $600 for wants.
• Wants = non-essential fun items:
  • Going out with friends
  • Shopping
• If your budget gets off track, cut wants first.
• Small wants (like $3/day vending machine snacks) add up:
  • $3/day × year ≈ $1,000 wasted.

How to Make a Budget (4 Steps)

​1. Figure out your income

• Add up all sources of money per month.

2. Divide income into percentages

• Apply the 50/30/20 rule to find how much goes to needs, wants, savings.

3. Prioritize your spending

• Look at everything you spend money on.
• Put each expense in the correct category.
• Adjust habits to match your new budget.

4. Set financial goals

• Saving is easier when you have a goal.
• Examples:
  • Taking a trip
  • Buying something expensive
  • Having emergency savings
• Calculate how long it will take to reach the goal.

Big Idea

• A budget is a tool, not a restriction.
• It helps you:
  • Prepare for unexpected expenses
  • Use money wisely
  • Reduce stress
  • Still enjoy life—just in a smart, planned way.