Breaking Down the 50/15/5 Guide From Fidelity Investments

Breaking Down the 50/15/5 Guide From Fidelity Investments
  • Opening Intro -

    One day I came across a guide from Fidelity Investments, explaining what they call the 50/15/5 guide.

    The guide explained that you need to use 50 percent of your income to cover all your essential expenses, 15% in retirement investment, and 5% for short term savings.


This means you do not need to count every penny, as with traditional budgeting.You would bucket them in the three categories I mentioned above.

50/15/5 Breakdown

Essential expenses

These are the expenses that you would categorize as rent, utilities food and transportation. There are ways that you can reduce these expenses, just by taking public transportation when possible to reduce expenses on gasoline. Shop around for utilities to get the best rates, prepare a shopping list when you need to go grocery shopping, and stick to it. This will help reduce impulse purchasing and saving you valuable dollars.

Retirement investment

This should be about 15 percent of your earnings.

There are many ways that you can save for retirement. One of the many ways is if your employer offers a 401k program. Especially if they have a matching percentage, you should take advantage of that program. As the adage says, “Never leave free money on the table.”

As an example, let’s say that your employer has a dollar for dollar matching on your contributions up to 10%. This means that for every dollar you save, your employer adds a dollar to your savings account. So, if you contribute 10% of your income, you are getting an additional 10%: totaling 20% savings.

There are other retirement options as well, such as Roth savings, Bonds, mutual funds. These are all long-term savings, and at retirement age they are tax free. However, early withdraw does incur a penalty.

Short Term Investments

Short term investments are known as investments in which you are trying to save or earn a return within a short period of time from 30 days to one year. There are many types of short term investments, and they range in risk levels.

One example is a bank or money market account from a bank. You save your money and earn a relatively low interest rate, but there is little or no risk to this type of investment. You can use this for short term goals, such as saving to buy a car, or a down payment on a home. Then you can get into other types of short term investments that range in risk/reward levels, from investing in stocks, precious metals, crypto currency, etc.

Budgeting and investments are only part of the equation for financial security. The other is reducing debt, such as safe credit card usage. Safe credit card usage is where you do not utilize credit cards whenever it is not necessary. Pay the full amount on your credit card statement each month. This will save you thousands of dollars in interest rates. Another way is to close any credit cards that you do not utilize.

Finally, try to avoid financing your purchases if possible. One example, is if you are purchasing a television that costs $2000.00. If you decide to finance that television and pay monthly payments for 18 months, that same television will end up costing you $4,500.00. This is $2,500.00 that could be saved or spent on something else.

I have found that by following this methodology, I have been able to save money for those lean months, in where I am not working on a project. These basic things have made me feel much more secure in my finances and offer me to live a better lifestyle. Since this has worked for me, I have been determined to share these basic principals with as many people as I can, so they too, can benefit from this information.

If you have found this article enjoyable, and useful, share this with others. Let them also experience financial freedom from very basic guidelines, that is attainable by anyone.


Fidelity Investments


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