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WalletPrep worksheet · Money basics

How do you make a budget that actually works?

Name ____________________ Date __________

Key ideas

  1. Budget from take-home pay, not salary. Use the deposit that lands in your bank after taxes and deductions. Gross pay plans to spend money you never see.
  2. 50/30/20 splits pay into needs, wants, savings. On $4,000 a month, that is $2,000 for needs, $1,200 for wants and $800 for savings and extra debt payments.
  3. Zero-based means income minus assignments equals zero. Savings and debt payments count as assignments, so $0 left unassigned does not mean $0 saved. The $3,800 example ends at $0.

Vocabulary

Take-home pay
The money that actually lands in your bank account after taxes and payroll deductions come out of your paycheck.
Zero-based budget
A budget where you give every dollar of income a job, so income minus everything you assign equals $0.
50/30/20 rule
A simple budget that splits take-home pay into 50% for needs, 30% for wants and 20% for savings and extra debt payments.
Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.
Irregular income
Pay that changes in amount or timing from month to month, like gig work, freelancing, tips, commission or seasonal jobs.
Tax withholding
Income tax your employer takes out of each paycheck and sends to the IRS for you, as a prepayment of your yearly tax.

Work it out

Jordan, 28, takes home $3,800 a month and carries a small credit card balance. He gives every dollar a job before the month starts.

  1. Take-home pay
  2. Rent
  3. Other needs
  4. Left after needs
  5. Emergency fund transfer
  6. Extra credit card payment
  7. Wants, including $250 fun money
  8. Left unassigned

Check yourself

  1. Your take-home pay is $3,000 a month. Under 50/30/20, how much goes to savings and extra debt payments?

    • A. $300
    • B. $600
    • C. $900
    • D. $1,500

  2. In a zero-based budget, what does $0 left over mean?

    • A. You saved nothing
    • B. You spent every dollar on bills
    • C. Every dollar has an assigned job, including savings

  3. Your pay changes a lot from month to month. What should you build your needs budget on?

    • A. Your best month
    • B. Your lowest recent month
    • C. Your average month
    • D. Last month only

Your turn

Open your bank app and find last month's total deposits from your job. Multiply it by 50%, 30% and 20%, and write those three numbers next to what you think you spend on needs, wants and savings now.

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Answer key

How do you make a budget that actually works?

Work it out

  1. Take-home pay$3,800
  2. Rent− $1,250
  3. Other needs− $1,050
  4. Left after needs= $1,500
  5. Emergency fund transfer− $300
  6. Extra credit card payment− $260
  7. Wants, including $250 fun money− $940
  8. Left unassigned= $0
  1. Needs are rent $1,250 plus $1,050 for utilities, groceries, car, phone, insurance and the card minimum: $2,300. That leaves $3,800 − $2,300 = $1,500.
  2. He sends $300 to his emergency fund and $260 extra to the card. Wants get $940, including $250 of fun money: $1,500 − $560 − $940 = $0.
  3. Needs are $2,300 ÷ $3,800 = about 61%, above the 50/30/20 guide, because of rent.

Check yourself

  1. B. $600 $3,000 × 20% = $600. Needs get $1,500 and wants get $900.
  2. C. Every dollar has an assigned job, including savings Savings and debt payments are categories too. Reaching $0 means nothing is unplanned.
  3. B. Your lowest recent month Planning needs around your lowest month means you can cover them even in a slow month. Extra in good months goes to a buffer and savings.