50-30-20 Budget

Budgeting

A 50-30-20 budget divides your spending into three categories: 50% for needs, 30% for wants, and 20% for savings and investments.

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This framework is useful if you're starting out with budgeting and need a structure that still gives you flexibility to decide where your money goes within each bucket.

Quick Example

With an income of $6,000: $3,000 goes to needs (mortgage, utilities, groceries, debt repayment), $2,000 to wants (eating out, streaming, fun money), and $1,000 to savings.

How Monarch Helps

In Monarch, use the category and group features to divide categories into your three buckets and allocate your income percentage to each group. Monarch can also suggest allocation amounts based on your previous spending.

Monarch automatically tracks your expenses through linked accounts. You can also add manual transactions and scan receipts for quick entry.

Related Terms

Income Cash Flow

Fixed Expenses

Budgeting

Fixed expenses are recurring costs that generally don't change month to month and can't easily be adjusted — such as rent, mortgage, subscriptions, debt repayments, and insurance.

Budgeting

A sinking fund is a savings method where you set aside a small amount each month to cover a large future expense — like a vacation, car repair, or annual bill.

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When the time comes, you'll have enough saved to cover it without going into debt. You can use a dedicated savings account or a rollover budget category.

Quick Example

Your car insurance renews every 6 months at $600. Set aside $100/month in a sinking fund and the full amount is waiting for you when the bill arrives — no debt needed.

How Monarch Helps

Track your sinking fund with Monarch's rollover categories or Save Up goals feature.

Related Terms

Non-Monthly Expenses

Yearly Budget

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Paying the full balance by the due date means no interest. Paying only the minimum results in interest charges on the remaining balance. Cards come with fraud protection, chargeback options, and rewards like cash back or travel perks. Most cards have credit score and income requirements.

Quick Example

You buy a $150 jacket with your credit card. The card company pays the store and adds $150 to your balance. At month end, pay the full $150 (no interest) or the $15 minimum (and get charged interest on the remaining $135).

Credit Limit

Credit

Your credit limit is the maximum amount you can charge to your credit card, set by the card servicer based on your income and credit score.

Monarch displays your VantageScore using data from Equifax on your account dashboard.

TransUnion

Credit

TransUnion is one of the three major credit bureaus. It uses your credit history to calculate your credit score and compile your credit report.

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Quick Example

You request your credit report through TransUnion's website to review your history and score.

Buy Now Pay Later (BNPL)

Loans & Debt

Buy Now Pay Later (BNPL) lets you finance small retail purchases in installments — typically without a credit check — spreading the cost over a few weeks or months.

Track your payments and balances using Monarch's Pay Down goals and debt tracker, which helps you plan payments and forecast extra payoff contributions.

Late Fee

Loans & Debt

A late fee is a financial penalty for missing a loan payment deadline. Lenders charge either a flat fee or a percentage of the payment.

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Returns come through dividends, rental income, or capital gains (profit from selling). Investments carry risk — there's no guarantee of gains, and some investments lose value.

Quick Example

You invest $5,000 in a mix of stocks and bonds. At a 7% average annual return, it grows to approximately $9,835 over 10 years — nearly doubling without any additional contributions.

Portfolio

Investing

A portfolio is the collection of investments you hold — typically a mix of asset types (stocks, bonds, real estate) to spread risk and smooth out market swings.

You earn $60,000 and contribute $7,500 to a Traditional IRA. This reduces your taxable income to $52,500, lowering your tax bill now — though you'll pay tax on withdrawals in retirement.

How Monarch Helps

Link your traditional IRA to Monarch to view balance, growth, and net worth.

Retirement

Retirement is when you stop working and fund your living expenses through savings withdrawals, investment income, Social Security, or passive income.

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Retirement accounts allow penalty-free withdrawals starting at age 59½. Social Security retirement age is 67 for those born in 1960 or later. Medicare eligibility begins at 65.

Quick Example

You retire at 65 with $800,000 in your 401(k), $200,000 in a Roth IRA, and $2,000/month in Social Security. Together, these cover your living expenses without needing to work.

Retirement Planning

Retirement

Retirement planning is the process of deciding when you want to retire, how much you'll need, and how to grow your savings and investments to reach that goal.

Taxes

The capital gains tax is what you pay when you sell an asset for more than you bought it for. It applies to stocks, bonds, ETFs, crypto, and certain real estate.

Your state government bills you for annual property taxes. At the grocery store, you pay a sales tax at checkout.

Related Terms

Federal Taxes Property Tax Tax Credit

Tax Credit

Taxes

A tax credit directly reduces the taxes you owe — dollar for dollar. Refundable credits can generate a refund if your tax bill is zero; non-refundable credits reduce your bill but not below zero.

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Quick Example

Ernest and Ava qualify for the Child Tax Credit, reducing their taxes owed by $2,200.

Tax Deadline

Taxes

Tax deadlines are the dates by which you must file your return. The standard individual deadline is April 15. You can request an extension to file, but any taxes owed must still be paid by April 15.

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Quick Example

Gillie fails to file by April 15, missing her refund opportunity and facing potential penalties on taxes owed.

Related Terms

Filing Federal Taxes Tax Refund

Tax Exemption

Taxes

A tax exemption means certain income, transactions, individuals, or organizations are not subject to tax — such as non-profit organizations or certain unprepared grocery items.

Real Estate

A cash-out refinance replaces your existing mortgage with a larger one, converting some of your home equity into cash. Your new mortgage covers your old balance plus the cash-out amount.

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Quick Example

Angelo's home has grown to $400,000 with $177,000 in equity. He does a cash-out refinance, receiving $97,000 in cash while taking on a new $320,000 mortgage.

Closing Costs

Real Estate

Closing costs are fees paid when you close on a home purchase — separate from your down payment. They typically total 3–6% of the mortgage and include lender fees, lawyer fees, taxes, and inspection costs.

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Quick Example

You buy a home for $350,000. Seven years later, similar homes sell for $500,000. Your home has appreciated by $150,000 — boosting your net worth without any extra payments.

Related Terms

Assets Investments Capital Gain

Assets

Planning

Assets are things you own that have tangible value — savings accounts, investments, real estate, vehicles, jewelry, and more. Assets count positively toward your net worth.

You open the Forecast tab and see that at your current savings rate, your net worth will reach $500,000 in 12 years. You add a 'Buy a home' milestone and see how a $60,000 down payment shifts that timeline.

Personal Finance Glossary

Every money term, defined with a real example

50-30-20 Budget

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Balanced Budget

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Budget

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Cash Flow

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Category Budget

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Envelope Budget

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Expenses

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Fixed Expenses

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Non-Monthly Expenses

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Flexible/Variable Expenses

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Flex Budgeting

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Flex Number

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Income

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Gross Income

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Net Income

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Monthly Budget

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Rollover Budget

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