Money experts love to recommend the 50/30/20 budget, but ignoring that advice helped me save more than $20,000

Andrea SuperBowl55 Rosco
4 min readApr 4, 2021

With the 50/30/20 budget, you spend 50% of your money on needs, 30% on wants, and 20% on savings and debt. But it only led to frustration.

The beloved 50/30/20 budget will certainly work for some people, but author Jackie Lam (not pictured) created a “money flow” system that’s helped her save thousands. Photo: Tetra Images/Getty Images

By Jackie Lam

Just as fitness buffs like to experiment with different exercise regimens and diets, as a money nerd, I’ve tried pretty much every single budget imaginable. From the zero-sum budget, where every dollar has a task and is accounted for, to the guilt-free budget, where you pay yourself first, then spend the rest — you name it.

I’ve also tried the popular 50/30/20 budget. That’s where you assign 50% of your income to your needs or fixed expenses, 30% to your wants or variable expenses, and the remaining 20% your debt and savings.

While it’s often touted as an effective way to manage your money, that didn’t ring true for me. In fact, ignoring the 50/30/20 rule was the best thing I did to stash more money in my emergency fund.

The author, Jackie Lam. Photo: Courtesy Jackie Lam

The 50/30/20 rule lead to frustration

On paper, the 50/30/20 rule sounds like a great idea. But for me, following these rules only led to feelings of frustration and anxiety.

If I couldn’t keep my spending within these three neat categories, I felt like I was failing. And those feelings of self-defeat discouraged me from keeping up with the budget.

Budgeting with the 50/30/20 rule felt time-consuming

On top of that, every month I felt like I was constantly having to track each expense and make tweaks to my budget. I found myself asking questions like, “Will my car insurance premium tip my ‘needs’ category over this month?” And when one-off expenses hit — like during the holidays, or when I spent more on “wants” during sales or when friends visited, I would get nervous about spending over the allocated 30% of my income.

I created a ‘money flow’ system instead

Instead of going by the 50/30/20 budgeting rule, I created my own ‘money flow,’ or system of linked accounts to help me save. While it took a bit of work up front to set it up, in the long run, creating a money flow has led to less time spent on budgeting and quibbling over daily spending decisions.

I keep a main checking account, which is where all my take-home pay gets deposited and where I pay my bills. Then, from there, my money is transferred to either a separate savings account or separate checking account. I use the separate checking account to keep my discretionary spending money, cash I use to pay for groceries, household items, clothes, and going out. My separate savings account has different “buckets” for different goals, including saving for a computer, vacations, and buying a new car.

When I had a day job and a steady paycheck, I tucked away the same amount into my savings account each month. When I switched to freelancing, I started socking away a percentage of what was leftover after I covered my basic living expenses. That way, I stay on track to reach my savings goals.

My money flow system reduced decision fatigue and helped me save

With this system, the only number I really needed to keep tabs on regularly was how much was in my checking account for everyday spending. As long as I was sticking to my weekly limit, I didn’t need to tap into my savings account.

More importantly, I didn’t have to feel bad if I dished out a little more on, say, food, or clothing in a given month. At the end of the day, as long as I was making headway on my money goals, I could allocate the rest without fretting too much over sticking to specific categories.

With my money flow system, I’ve been able to build an emergency fund of $20,000. I also have separate savings that I can dip into if I want to take a spur-of-the-moment road trip, spend a little extra at a restaurant, or use when I’m having a slow income month. I treat my emergency fund like a “golden cow” of sorts, to be protected and not “slaughtered” under any circumstance. I definitely couldn’t do that with the 50/30/20 system.

Sometimes what’s popular doesn’t always work for you. I’ve found that coming up with your own way of managing money can take a bit of trial and error. There’s no one-size-fits all solution, so you’ll need to do a bit of exploring to see exactly what sticks and what’s effective.

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