Become Financially Fearless with the 50/20/30 Rule

With no credit card debt, and six months’ salary saved, I thought I was in great shape financially.

But then I started reading Financially Fearless by Alexa Von Tobel, and realized how much better I could be doing.

What’s great about the book is Alexa is realistic about how people live their lives; she tells you that you don’t have to give up your latte (or in my case a soy hot chocolate) in order to save money. But she makes you face facts: those lattes (read: soy hot chocolates) are not necessities. And if you want to buy and drink them, you have to budget for them out of your 30% lifestyle section of your budget.

Because the way Alexa wants you to think about how you spend your money is based on a 50/20/30 breakdown of your take-home pay: 50% goes to necessities (rent, utilities, transportation, food), 20% goes to paying off debt and saving for the future, and 30% is for everything else.

With that new framework in mind, it became time to crunch some numbers. There are spaces to write down the numbers so you can plan accordingly.

You can’t get away with saying “oh yeah my credit score is fine,” like I did, which was based solely on my never missing a payment. The book gives you sites to visit that will tell you your credit score (whew! I’m above 760!) and then really doable and realistic tips for how to improve it.

But more than figuring out how much to spend and save and how to address issues like student loan debt and planning for retirement, this book makes it ok to talk about money.

It makes it ok for me to tell a friend that I was afraid of online banking, ok for me to discuss how much I put towards my 401(k) (upped it from 4% to 6% to get my full employer match) and to talk about how many $5 bills I have put aside as a way to save a little something extra (21).

I’d say that now I am probably financially emboldened.

But once I put into action some of the other tips from the book—open another savings account, cancel a store credit card I don’t use, and add a picture of a dog to my wallet to help encourage its safe return should I ever lose it—I will be even closer to being financially fearless.

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