Budgeting Basics: The 50/30/20 Rule
What Is the 50/30/20 Rule?
The 50/30/20 rule is a simple budgeting framework that divides your after-tax income into three categories.
The Breakdown
50% — Needs
Essential expenses you cannot avoid:
- Housing (rent or mortgage)
- Utilities
- Groceries
- Insurance
- Minimum debt payments
30% — Wants
Non-essential spending for enjoyment:
- Dining out
- Entertainment
- Hobbies
- Subscriptions
20% — Savings & Debt
Building your financial future:
- Emergency fund
- Retirement contributions
- Extra debt payments
- Investment accounts
TIP
Start tracking your spending for one month before implementing this rule. You might be surprised where your money goes.
How to Implement It
Calculate your after-tax monthly income, then allocate accordingly. Use a spreadsheet or budgeting app to track your progress each month.
John Doe
Senior Financial Analyst
John Doe is a Certified Financial Planner (CFP) with over 15 years of experience in personal finance, investment strategy, and retirement planning. He has contributed to Forbes, Bloomberg, and The Wall Street Journal.
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