For over three decades, Jerry Guttman has worked in finance in Arizona. A financial advisor with Total Living Plan, Jerry Guttman is a firm believer in the importance of financial literacy and has spoken about many related topics via his membership in the Society for Financial Awareness, a nonprofit educational organization. One of the most basic components of good financial literacy is budgeting. While there are many methods of budgeting, the 50-30-20 rule is a popular, albeit simple, tactic. When employing this method of budgeting, a person’s monthly income is broken down into three categories: needs, wants, and savings and debt. Needs are necessities that a person cannot avoid paying for, like housing, basic utilities, and food costs. Based on the 50-30-20 rule, no more than 50 percent of a person’s monthly after-tax income goes toward covering these costs. Meanwhile, 30 percent of a person’s after-tax monthly income is allocated for wants. These are things that a person desires but that are not necessary for survival. Dining out and vacations are two common examples. Determining what is a want versus a need is challenging, but wants are generally for fun and are not essential for living or working. Finally, the remaining 20 percent of a person’s monthly income goes toward savings and debt. This includes all savings, such as retirement and emergency fund savings, along with extra debt payments to pay down existing debt more quickly. The minimum payment for these debts is included in the 50 percent category since they are essential payments.

1. Jerry Guttman

2. For over three decades, Jerry Guttman has worked in finance in
Arizona. A financial advisor with Total Living Plan, Jerry Guttman
is a firm believer in the importance of financial literacy and has
spoken about many related topics via his membership in the
Society for Financial Awareness, a nonprofit educational
organization.

3. One of the most basic components of good financial literacy is
budgeting. While there are many methods of budgeting, the 50-
30-20 rule is a popular, albeit simple, tactic. When employing this
method of budgeting, a person’s monthly income is broken down
into three categories: needs, wants, and savings and debt.

4. Needs are necessities that a person cannot avoid paying for, like
housing, basic utilities, and food costs. Based on the 50-30-20
rule, no more than 50 percent of a person’s monthly after-tax
income goes toward covering these costs.

5. Meanwhile, 30 percent of a person’s after-tax monthly income is
allocated for wants. These are things that a person desires but
that are not necessary for survival. Dining out and vacations are
two common examples. Determining what is a want versus a need
is challenging, but wants are generally for fun and are not
essential for living or working.

6. Finally, the remaining 20 percent of a person’s monthly income
goes toward savings and debt. This includes all savings, such as
retirement and emergency fund savings, along with extra debt
payments to pay down existing debt more quickly. The minimum
payment for these debts is included in the 50 percent category
since they are essential payments.