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Budgeting for Big Picture People

It's not the amount, it’s the percentages that count

There are some numbers in life you should always remember. Your PIN numbers, your spouse's birthday, (maybe your mother-in-law's birthday), the number of children you have, their birthdays, and quite possibly the annual date for the football grand final.

In this article

But when it comes to the financial foundation that makes everything possible, the two numbers you must know are

  • how much income you take home each month
  • how much you spend each month

If you don't know these two key numbers, it won't be long before life becomes needlessly harder and your future more uncertain. Simply put, we all need to spend less than we earn and have a plan about how to keep it that way.

Budgeting is about getting more out of life with less and reducing waste

Hard truths

The only way to achieve financial good health is to master the dark arts of budgeting.

Let's be frank; a complicated budget without a purpose is a drag. Usually, the thought of having to track every cent, keep every receipt, and constantly check you have enough left at the end of the month, leaves most people cold. Is it any wonder family budgets and arguments about money are the number one reported relationship stressor for couples of all ages?

If you're a big picture thinker or you’re not familiar with the art of better managing your money, the 50-30-20 percentage-based budget can become your powerful habit-forming helper. If the name ‘budget’ doesn’t work for you, consider it a ‘spending plan’. Either way, it's your path to greater financial freedom.

Understanding the 50-30-20 approach to budgeting

This percentage-based budget simply splits all your spending into one of just three categories.

  1. Needs
  2. Wants
  3. Savings

Helping you focus on managing the percentages is designed to make managing money matters easier.

The Six steps to successful big picture budgeting

  1. First, work out what your monthly take-home income is. (this is the after-tax in your pocket amount).
  2. Then divide this amount by 50%, 30%, and finally 20%.
  3. These amounts will become your spending limits for the three key categories of needs, wants, and savings.
  4. Next, begin to track your spending for the first month and allocate your spending into one of the three categories.
  5. Once you know where your money is going, see if the category spending limits match the ratio of 50-30-20.
  6. Now you know where your money is going, adjust your spending so you don't overspend in either of the three categories.

At the end of the month, if you see you’ve been buying more wants than needs, you’ll know where you’ll need to adjust your spending to bring you closer to your spending ratios of 50% on needs, 30% on wants, and 20% to savings.

What's included in each category?


Needs are those life essentials that include mortgage repayments, rent, utilities like power and water, food, healthcare, and the usual household requirements. You could say a need is something that if not paid would result in legal action, perhaps the loss of a job or a sickness or injury.


Wants are the things you buy for personal happiness like gym memberships, Netflix, broadband, dining out, and car washes.


Savings is the amount you put aside for your future. Savings help build your emergency savings fund and include investing for the future, any extra contributions you make into your superannuation fund, an investment property or perhaps an Education Savings Plan for your kids or grandkids' future.

The only barrier to becoming a master of the percentage-based budgeting technique is your ability to separate what's a ‘need’ and what's a ‘want’.  Why not teach your kids the 50-30-20 approach with their pocket money?

Why it works

  1. Simplifying your personal finances into 3 main categories means you quickly see the bigger picture in three easy to understand areas; needs, wants and the future savings
  2. Money conversations with your spouse and your children often become simpler, and your confidence about surviving life's usual financial ups and downs becomes stronger.
  3. It doesn’t rely upon complicated lists and in-store arguments with your spouse over whether you should buy those designer shoes or the new gaming console: if you’re inside your set percentages, go for it.
  4. Simple plans usually have a greater chance of being followed. Developing a new financial habit is often the surprise end result. 

People who use the percentage-based budgeting approach, often say it's freed up time and even reduced arguments in their relationships about feeling guilty for spending money.

The last word

Having a budget is really just you telling your money what you want it to do for you.

The percentages you choose to use for your budget are just an indication of what's important to you, and where you want to go in life. As your needs and goals change, so can the spending percentages you choose for your Wants, Needs, and Savings.

If you’d like to learn more about the 50-30-20 big picture approach to budgeting, you might like to read How to Budget Like a Badass and download our free resources to help you master your personal money matters

Drew Browne Modern Small Business thought-provocateur
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