The 50/30/20 budget is actually a very good budget for average folks who want to live a more mainstream kind of lifestyle but also want to be financially secure. Most folks would be immensely better off by following this budget instead of what they are currently doing. (Most Mustachians are not in the group that would be financially better off than what they are doing.)
From reading the various comments it was pretty clear that a bunch of folks aren't familiar with this budget.
50% "Needs" - Needs and prior contractual obligations (regardless of how foolish)
30% "Wants" - Stuff you want but don't have to.
20% "Savings" - Savings, investments, pre-payment of debt.
First of all, why these percentages and not some others?
50% "Needs":
Just had a pay cut or had your hours cut back or your spouse just lost their job? You can immediately cut your spending in half. Being able to do that when bad times come around makes a household way more resilient.
20% "Savings":
It takes about 2 to 3 years to build an emergency fund that will cover the "Needs" for a year. How many families in this country are saving at such a prodigious rate? (Not many.) How many have savings that could cover their "needs" for 3 months, much less a year? It may seem low by our standards, but by normal American standards this is an amazing savings rate.
30% "Wants":
At a 30% fun money rate, they can still "fit in" with their peer group. That's really important to a lot of people and is a real deal-breaker for a lot of people when it comes to Mustachian-style savings.
Examples:
I put $300 into my 401K. That's savings.
My medicine, necessary for my health, costs $100 a month. That's needs.
My wife's makeup, unnecessary for her employment and unneeded to hide some injury from the world, is a want. My friend, who is a model, would consider that makeup expense a need, and rightly so.
I bought a reasonably sized and priced house for my family. The mortgage payment is $1000 a month. This expense would be categorized under "Needs".
I decide to pay my $1000 a month mortgage plus an extra $500 a month to pay it off early. That's $1000 to needs and $500 to savings because I'm reducing a future debt payment.
I spend $600 on food, $200 of which is steak and lobster and its like. $400 goes to needs, $200 goes to wants.
I already bought a $5,000 gaming system that I couldn't really afford. I have payments of $200 a month for another 4 years to go. This, dumb as it is, is categorized under "Needs" as it is a contractual obligation I have put myself under.
I am considering buying a $4,000 gizmo for our family's amusement. It will cost $200 a month. If I add this $200 to my current "Needs" spending, I will be spending 51% of our income on "Needs". The correct budget response is to say, Nope, can't buy it.
It's important to remember that people start improving their personal finances from a variety of places. Someone who starts at 80% Needs, 30% wants and -10% savings needs to focus on cutting spending on wants (to stop the budget deficit) and then needs to focus on paying off the needs or replacing those needs expenditures with less expensive options.
Someone at 45% Needs, 35% wants and 20% savings has a financially secure situation. If they keep their needs spending below 50%, they'll be just fine (barring catastrophic issues).
Here's another reason this budget system works for folks. It's low maintenance. I need to figure out what my needs spending is and get to where my savings are on autopilot. I don't have to count every penny, I just need to pay attention to my spending on a few key areas where my needs spending could easily be increased by lots of wants spending. For most people, that's groceries and unexpected medical bills or unplanned repair costs. If someone gets a raise, or their income cut, or the rent goes up, or they are considering buying something on time payments; then a bit of math is needed. Otherwise, they pay their needs and set aside their savings, then spend the "wants" money on whatever.
This was developed and written up first by Elizabeth Warren some years back in her book, "All Your Worth".
If you've got friends and family who need a better personal finance model that what they're currently doing, and they aren't willing to go full on mustachian, this may well be something they could accept and follow.
