u/Grownixx

A few days ago I made a post about the single most important step when starting a budget. If you completed this step congrats, the hardest part is behind and now creating a budget is so much simpler. But how to create a budget that lasts?

Many people probably smarter than myself would use a zero-based budgeting method. There are a lot of educational materials on the topic which can be accessed easily. I think this method is genially great and it works for many people in US that decided to take control over their money. For me this method feels too strict and I personally fail the mission to give every dollar a job and there are many people just like myself.

I prefer to use a different method. This method splits all my spending just into 2 categories: Fixed and Flexible expenses. People who use 20 different budgeting categories would call me crazy and tell me that this method is set for inefficiency and suboptimal spending, but it works for me and most importantly it lasts.

So here’s the method in 3 simple steps:

Pay yourself first. Decide on a specific amount that is untouchable and automate it moving on a pay day to savings or investments account. 10% is usually a good number, but you can start much smaller. The key is to build a habit, not to save a fortune immediately.
Understand your fixed expenses. Rent, mortgage, subscriptions, day care, gym, car payments etc. These are usually fixed. You can simply review your last few month bank statements to find out which transactions are same every month. See if anything can be optimized here.
Whatever is left after paying yourself and covering the fixed stuff gets split across the weeks. If you overspend one week, recalculate for the rest of the month. If you underspend, let it roll into the next week or go to savings.

I’ve been using this method for couple of years now and it helped me to enjoy life while saving and investing consistently. It won’t fit for everyone. Same as zero-based method doesn’t fit everyone. But it’s fair to have several options so as many people as possible would find their way to take control over money.

If anyone need help to set up such a budget let me know in comments 🙂

20 years ago the median rent in the US was around $700. This is not our reality anymore. And yet people who are desperate to take control of their money see 50-30-20 everywhere — a method that's been outdated for a long time. A huge number of people, including many in the top 20% of earners, find it simply doesn't apply to their situation.

In my case "NEEDS" are over 60% of my income, and yet I'm enjoying life and have full control over my money.

Here's the system that works for me. It divides those 3 the way that actually makes sense:

Savings — I save automatically the moment my paycheck hits the bank.

Fixed expenses — I know exactly what my fixed costs are, review them regularly, and make sure they're covered right after savings.

Flexible spending — whatever is left after savings and fixed costs gets divided by weeks, so I know exactly what I can spend each week.

This keeps me from overspending and removes any dependency on percentages that stopped making sense years ago.

Curious if anyone here has actually made 50-30-20 works long term, or if you also moved on from it.

I hear a lot of people say they want to take control of their money but have no idea where to start. The whole thing feels overwhelming before it even begins.

I know some budgeting people will disagree with me here, and every financial situation is different, but I genuinely believe there is only one step in building a budget that is actually hard. The rest is pretty easy, and some of it is even fun once you get going.

That one hard step is understanding your fixed expenses.

Which expenses are exactly the same every month? What is the total of all of them combined? And is there anything in there you could cut?

The only way to do this properly is to go through two or three months of bank statements inside your banking app. You are looking for rent, mortgage, daycare, car payments, debt payments, subscriptions, insurance, and anything else that shows up automatically every month. Write it all down and add it up.

Here is the part that surprises most people. The average American thinks they pay for around three subscriptions. The actual average is closer to eight. You are almost certainly paying for something you forgot about or stopped using. Cancelling those alone can save well over a thousand dollars a year.

Once you have your fixed expenses total you finally see the full picture. That number is often hard to reduce because rent, debt, and daycare are not easy to negotiate down. But knowing exactly what is committed every month tells you what is actually free.

Building a budget around what is genuinely yours to spend is a completely different experience than guessing.

For people who completed this step, what did you find the last time you went through your numbers?