Wealthy families often hire financial experts, tax lawyers, and investment advisors to help manage their money. However, many of the systems they use can be replicated by anyone, regardless of income level.
Whether you earn $50,000 or $500,000 a year, a straightforward budgeting approach can set you on the path to financial freedom. In fact, sticking to a disciplined money management could help you avoid the paycheck-to-paycheck cycle that affects roughly one-third of families earning more than $200,000 a year, according to PYMNTS. (1)
With that in mind, here’s a closer look at the “15/65/20” system that can help you build lasting financial stability.
The 15/65/20 system is a modern take of the 50/30/20 rule, popularized by Senator Elizabeth Warren in All Your Worth: The Ultimate Lifetime Money Plan.
At its core, the system divides your income into three categories — savings, essentials, and discretionary spending — with clear limits for each. The key principle is to prioritize saving first.
As billionaire investor Warren Buffett famously advised, “Do not save what is left after spending, but spend what is left after saving.” Financially successful people understand that the first step to long-term security is setting aside money for savings and investments before making any other financial decisions.
Start by dedicating 15% of your monthly income to savings and investments. If you’re beginning from scratch, this amount can help you build an emergency fund covering several months of essential expenses. Once that cushion is in place, you can begin investing for future growth.
Next, limit essential expenses to 65% of your income. This requires a conscious effort to live below your means.
According to the Bureau of Labor Statistics (BLS), the largest household expenses typically include housing, food, and transportation. (2) Reducing costs in these areas — by renting a smaller home, driving a more affordable car, or cutting grocery waste — can help you stay within this limit.
Finally, allocate the remaining 20% of your income to discretionary or “guilt-free” spending. This is your budget for personal enjoyment — shopping, dining out, streaming services, or hobbies — without derailing your financial goals.
