The 50-30-20 rule
I’m a big fan of budgeting. Not just because it’s the frugal approach to money management but when you can control where your money is going before you give it the opportunity to control you, you will be better off in the long run. Budgeting gives you a sense of how much money you’ve applied to certain things in relation to the income you are making. What’s so great about budgeting is that there are many ways to skin a cat. Some people prefer apps while others prefer an excel sheet and some simply like the envelope method. There is no one size fits all, which allows for creative ways to ultimately create less stress and more wealth. At the end of the day, it’s up to you to follow your budget rules.
The amount of discipline it takes to follow your budget is a difficult task especially as a professional athlete. You are young, ambitious, and in most cases making more money than the circle around you. The natural tendency is to spend the money on things you may or may not need.
There have been multiple athletes that have reportedly lived off less than half of their income, which is very commendable. Not all cases are that easy to follow however. It’s vital that you connect with your financial team and get your budget in order. One budget to consider is the 50-30-20 rule. One of the more famous budget methods the 50-30-20 rule breaks down how you should allocate your funds. For an athlete, this could be a budget method to get behind depending on your goals because it gives you a roadmap on where you are financially and where you can go by simply following the method.
So what is the 50-30-20 rule exactly:
The 50-30-20 budget rule is the break down of your income after taxes into different categories for spending and saving at your discretion.
50 percent of your income is meant for necessities such as rent/mortgage, food, insurance, utilities, etc.
30 percent of your income is meant for wants. This could be travel, shopping, eating out, etc.
20 percent of your income is meant for saving/investing. Whether you are contributing to your 401k, transferring money to your savings account, or doing another method, that’s the saving amount.
I wasn’t familiar with this 50-30-20 method but I think it’s a good base to start with as a budget method. You can adjust your percentages based on particular goals you may have. Whether it’s lowering your necessity percentage to increase your savings percentage or lowering your spending percentage to increase your necessity percentage.
Having a budget will help you as an athlete stay on track with things on the field. Whether it’s a new big purchase or simply helping out a family or friend. Knowing where you can spend your money allows for you to have one less thing to worry about.