Kansas State University


Powercat Financial

Spending Post-Graduation: The 50/30/20 Rule


Seniors: buckle up. If your parents and/or FAFSA are cutting you off any time soon, you will need to learn how to manage your money yourself. The 50/30/20 rule is a great starting place for first-time budgeters because it is a simple way to make sure your spending habits are on track with generally acceptable benchmarks. Using this philosophy, your income should go towards 3 main buckets:

50%* of your income should go to NECESSITIES.

  • Necessities are living expenses such as:
    • Rent/Mortgage
    • Utilities
    • Transportation (gasoline, Uber/Lyft, public transit)
    • Groceries
    • Insurance
    • Minimum payments on debt
  • Your rent or mortgage payments should be no more than 30% of your income.

*If your necessities require more than 50% of your income, dip into the next bucket…

30% of your income can go to DISCRETIONARY EXPENSES.

  • Any “fun” purchases are considered discretionary expenses:
    • Eating out (restaurants, fast food chains)
    • Entertainment (concerts, sporting events, streaming music/video)
    • Hobbies (art supplies, books, sporting equipment, gym membership)
    • Traveling (airfare, hotel)

20%** of your income should be SAVED or put towards PAYING OFF DEBTS.

  • The earlier you start saving, easier it will be to achieve financial security and achieve your financial goals:
    • Emergencies
      • According to Dave Ramsey’s “7 Baby Steps,” start an emergency fund by working up to $1,000 in a savings account.
      • Financial planners recommend saving 3-6 months’ worth of expenses in a savings account.
      • If you don’t have very stable employment, perhaps this number should be higher for you. Your needs depend on your situation!
    • Student Loan/Other Debt Repayment
      • Find out what your monthly student loan payments are going to be by looking at the Federal Student Aid website and using their repayment estimator.
      • Use our student loan repayment estimator worksheet to see how much of your income you need to put towards your student debt.
      • Use your credit card like a debit card; only charge purchases you know you can afford. Pay off your credit card in full every month and start chipping away at your total balance.
    • Retirement
      • For someone starting young (ages 25-35), the industry-recommended benchmark to shoot for is 10-13% of your gross pay toward retirement accounts.
      • A peer financial counselor can help explain to you all the different types of retirement accounts!
    • Financial Goals
      • Whatever is left over can be used to achieve your own personal goals.
      • Use the S.M.A.R.T. acronym to remember how to set good financial goals: specific, measurable, attainable, realistic, and time-bound.
        • Example: “I want to have $20,000 in my savings account at the end of five years so I can put 20% down on a $100,000 house.”

**Like before, if your debt repayments require more than 20% of your income, dip into the discretionary expenses bucket.

This method, and other methods of budgeting, will look different for everyone. Make an appointment with Powercat Financial today at www.ksu.edu/powercatfinancial and we can help you fill out a spending plan specific to your unique situation!

Abby Pope, Peer Counselor II

Powercat Financial

302 K-State Student Union, Third Floor

918 N. 17th Street

Manhattan, KS 66506-2800