If you’re unsure of how to budget your expected income, a popular and effective approach is a 50/30/20 budget.
This method of budgeting recommends you allocate 50% of your expected take-home income toward needs, 30% toward wants, and 20% toward savings and debt reduction.
We’ve written about the 50/30/20 budget rule in the past, and even created simple calculators for Google Sheets and Microsoft Excel to help you understand what your annual 50/30/20 budget would look like.
Here we’re taking it a step further to help you understand how to use the Foundation Template for Google Sheets powered by Tiller Money Feeds to build a smarter monthly 50/30/20 budget.
Out of the box, the Foundation template can help you see what percentage of your expense budget is going to each group.
Simple steps for creating a 50/30/20 budget in your Foundation Template
First, think about your Categories and how you spend and earn your money. Customize this list on the Categories sheet in the Foundation template.
Feel free to clear away the example categories. Each category should also be assigned to a group. To follow along with the 50/30/20 budgeting method use Needs, Wants, and Freedom (debt reduction and savings) for your groups.
As you customize your categories, think about how they break out into these three main 50/30/20 groups:
- 50% to NEEDS: rent/mortgage, groceries, bills, transportation.
- 30% to WANTS: entertainment, certain subscriptions, fun stuff!
- 20% to FREEDOM: eliminating debt and building savings
You’ll also want a Transfer category and one or more income categories.
These should be in separate groups. We recommend a “Transfers” group that uses the transfer type and an Earnings category that’s an income type category.
Note: We recommend keeping your budget categories simple.
Once you’ve got a good list you can sort the Categories sheet by the group column. Just hover over the column letter and click the small triangle to open the menu and then choose Sort A>Z.
This helps organize things as you’re thinking about your needs, wants, and freedom budget amounts.
Next, start setting the budget amounts for each category in column E on the Categories sheet.
Start with your income categories to see how much you have to work with. From there start filling in the Needs categories and reference the Monthly Budget sheet to see what % of your budget is going towards the Needs group.
As you’re setting budget amounts pay attention to the Planned Cash flow amount in the upper left of the Monthly Budget sheet to make sure your planned cash flow is positive.
Using a 50/30/20 method you’ll plan to spend or set aside your entire take-home pay so eventually, your planned cash flow will balance to $0.
Do these steps for the Wants and Freedom groups to work out your 50/30/20 budget. These are the basic steps for using the out of the box features of the Foundation template for 50/30/20 budgeting.
If you’d like help with calculating your budget amounts for a 50/30/20 budget you can check out this example spreadsheet.
Add the 50/30/20 calculator to your Foundation Template
You can easily add this calculator sheet to your Foundation template using these steps:
- Copy the URL of your Foundation template.
- Right click the 50/30/20 Calc in the example sheet and choose “Copy to”
- Paste the URL of your Foundation template into the bottom of the window that pops up and then click the “Select” button.
- Open your Foundation and look for the new tab called Copy of 50/30/20 Calc to the right.
You should now see a list of your Categories in column G. Make sure you go ahead and set up your groups to use the Needs, Wants, and Freedom groups described earlier. This calculator sheet is expecting those groups.
Enter your take home income goal amount per month into cell B2. You should then see how much money per month should be going toward Needs, Wants, and Freedom in the Goals column (B).
You also get a total of how much your total expenses, including debt reduction and savings, will be and your planned cash flow.
Next, if you’ve already set budget amounts on the Categories sheet you can enter (copy/paste) the budget amounts you set on the Categories sheet into the light green cells in column H on this 50/30/20 calculator sheet to see close you are to meeting the 50/30/20 percentages.
From here you can fine tune them to align with those percentages by adjusting amounts in the light green cells for each category and pay attention to how the percentages change in column D.
Make sure your budget % in cell E6 isn’t greater than 100% and that the projected cash flow amounts aren’t negative amounts.
Once you’ve got the amounts worked out in the light green cells on this planning sheet just copy/paste those amounts into the Categories sheet in column E. If you need to adjust any specific month’s budget, you can just set the plan on this sheet and then copy/paste the amounts into that column on the Categories sheet.
Special notes about this calculator sheet
Be careful not to sort the Categories sheet in the middle of planning out your budgets in column H. The categories list in column F is based on the order in your Categories sheet, but the budget amounts in column H won’t update to follow the category if you sort.
Recommendations on how to categorize transactions for debt reduction and savings:
Some 50/30/20 suggestions out there recommend having a “Needs” category for the minimum payment due on a debt and then having a separate category just for extra debt paydown. This is totally up to you.
In either case, we recommend that these are expense categories that you’re budgeting for each month. When you make the payment or transfer money to a savings account and see a negative amount transaction for the money leaving your checking account in your Transaction sheet you’ll use the debt payoffs or savings expense categories.
If you also have the debt or savings account connected and see the positive amount transaction for the inflow associated with that amount we recommend using the transfer category for these transactions.