Who else agrees that the 50-30-20 rule for living expenses is impossible for low-income earners?

Are you familiar with the 50-30-20 rule when it comes to living expenses?

I don’t like the 50-30-20 rule because I think it’s a physical impossibility for too many people.

Let’s tackle this tough topic.

There seems to be some debate on how the 30-20 portion of things should go, but mostly the “financial experts” agree that 50% of your income should go towards needs. That’s housing, groceries, utilities, clothing, child care, transportation, etc.

The Credit Counselling Society even went one step further breaking it down and sectioned off 35% of income for housing. Ha!

The reality is the “financial experts” writing these articles are geared towards higher income earners.

The real reality for many of us is that our after-tax income is $1,000/month. If we have a really good job or maybe hold down two jobs, we might make closer to $2,000/month.

Many of us single women are probably somewhere in-between those two incomes.

Cheap rent?

Let’s start off with $1000 a month income and apply the 50-30-20 rule. Who knows where to find a rental for $350 to $500 a month?

A one-bedroom apartment in Los Angeles averages around $2200.

In Vancouver, that rental will be around $2,000.

Got a family and need more bedrooms? It doesn’t look good. Rent costs more than income.

If it’s time to find a city with affordable rents, it looks like Wichita, Kansas might have the cheapest rent coming in just under $700.


Better hope you’re bringing in closer to $2000 a month income to squeak into the 50-30-20 rule.

And we all know you get what you pay for. There’s no doubt in my mind that those $2000 one-bedroom apartments in Vancouver or L.A. are going to be tiny and possibly not in a good area.

Full time camping?

Then there are people live in campers because they can’t afford rent.


I could even be living in an RV today if I hadn’t turned down my father’s offer to transfer his impulse buy into my name.

Changing your Money Attitudes when you’re Suddenly Single

I’m not a camper so I declined. A year later and suddenly single and looking for a place to rent, I regretted not taking it.

The best place to park is in industrial and business areas. The parking is free and usually no one hassles the campers. An RV with a toilet and shower, kitchenette, and sleeping area would be a lot more comfortable than a tent, that’s for sure!

The “50+” rule is reality

Housing is expensive. I’d say most people spend closer to 75% (if not more!) of their income on housing. And they’re probably still not living in the best digs.

This article says one in five renters in British Columbia spend more than 50% of their income on their rent. https://www.straight.com/news/1071531/bc-has-highest-proportion-renters-canada-spending-over-50-percent-income-housing

The logical assumption is just about every city in North America has too many renters also paying over 50% of their income on a place to live.

If you want to own a home around Vancouver, be prepared to sink 88% of your income into your mortgage. https://financialpost.com/real-estate/mortgages/canadian-housing-affordability-worsened-in-q1-ending-one-quarter-reprieve-rbc

The city where I live, a one-bedroom suite starts around $700/month. This will be an older place and it might not even be in a good neighborhood. $1,000 to $1,200 a month is more average, so it’s a little cheaper to live farther out from downtown Vancouver.

Let’s just call it $1,000/month is about the average rent on a smaller apartment. If that’s your monthly income after taxes, you better hope you’re in a relationship with someone else contributing to the rent. If you want another bedroom so you and a roommate aren’t sharing, the price keeps going up.

It’s very difficult for single, low income people to find a place that only costs them 35% of their income.

If you’re a single woman your after-tax income needs to be at least $2,000 just to afford low rental housing in probably an older, run down suite. That’ll still set you back 50% of your income.

The “30” rule

30% of income is supposed to go for our “wants” according to Wealth Simple.

That’s the fun stuff like entertainment, eating out, and traveling.

Ha ha! Dream on! Who around here has an extra 30% of their income available every month for playing around?


Here’s the reality of the “30” rule for low income earners who’ve just spent 50% or more of their income on housing.

Whatever shall we do with that what’s left of our take home pay after we’ve paid the rent? Hungry? About 10 to 20% of our income is going towards groceries. Another 10 to 20% is going to be on transportation. Bus rides aren’t cheap where I live. If you live out here in the boonies and work in Vancouver, that’s about $10 round trip on the bus, times 20 work days in a month. Not to mention the inconvenience. Public transportation is pretty crappy around here. Takes double the time as driving your car.

Generally speaking, gas for my car plus insurance averages around $300/month.

So let’s take rent at $1000 and groceries and transportation at $300 each.

Needs are already at $1600.

Let’s just hope you don’t need medicine, dental work, or clothes.

Forget about an entertainment budget, because we now have to pay for utilities: gas, electric, water, cable, and phone.

I think that just ate up the rest of the $2,000.

And that is the life of a low-income earner.

The 50-30-20 Rule for Living Expenses is impossible for low-income earners

Debt and savings

One of the things that causes a lot of financial instability for people is debt. We’re not talking about people who can’t get their spending under control and whip out their credit card to buy everything in sight.

We’re talking people who need to use the credit card to pay for emergencies and help cover the gap between their income and basic living expenses.

This is our reality.

Around here, I really encourage my readers to find even a little bit every month to put into a savings account.

In my post, Figuring Out Your Money, we talked about creating a money map and writing out Incoming and Outgoing. It’s a simple as that. Your money comes in. Your money goes out.

The it comes down to dollars and sense, figuring out your goals, and bridging any gaps.

You may find it’s helpful to track your spending using a Backwards Budget. This means you track your monthly expenses and make sure there’s enough money in your bank account to cover them. You will find tips in those articles to help you watch for spending patterns and make adjustments to your spending to reallocate your money.

50-30-20 rule be damned!

When you know how much money is going where, you can figure out how to make adjustments and allocate extra money towards paying down your debt, starting an emergency fund, or saving for retirement.

You might need to make sacrifices now, like shutting off the cable, but it won’t be forever. Just until your financial goals are on track.

Nerd Wallet

On the Nerd Wallet how to build a budget article, it talks about the 50-30-20 rule and even throws in a little calculator where you can plunk in your after tax income and tells you how much room you have for necessities, wants, and savings/debt.

I kind of think most of us can do that math in our head! And we don’t like the amounts we get.

A lot of low income earners who pay high rent think the article is a lot of bullshit. It’s almost worth reading the article just to read the comments!

There is some good advice and links to worksheets, so I’d recommend taking a look.

And then you’ll figure out why I was inspired to write a post about how the 50-30-20 Rule for Living Expenses is impossible for low-income earners.

Published by Cheryl @ The Lifestyle Digs on December 2, 2020.

More reading:
How to Save Money and Bust Debt
Taking Control of Debt on a Low Income
Women and Money: Short-Term Needs and Long-Term Goals

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