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Budgeting with 50/30/20

Building A Budget with the 50/30/20 Rule

Getting started with 50/30/20

50/30/20 is a proportional budgeting system, meaning you divide your monthly income into different categories based on percentage. It’s simple and flexible, which makes it a great option for beginners.

Calculate Your Income

Your monthly net income—that’s your take-home pay after taxes and payroll deductions—is used to determine your spending limits. For example, if your monthly net income is $3,000, you should be spending:
  • 50%—$1,500 on needs
  • 30%—$900 on wants
  • 20%—$600 on savings
Did you know... the 50/30/20 budget comes from All Your Worth, a book by Elizabeth Warren and Amelia Warren Tyagi.

Define Your Categories

The 50/30/20 budget divides your monthly spending into three categories: Needs, Wants and Savings


Needs are your essential expenses—skipping them would lead to serious consequences like illness, job loss or legal trouble; examples include:
  • Housing/rent
  • Basic utilities
  • Food
  • Clothing
  • Health care
  • Transportation
  • Taxes
  • Minimum payments
Budgeting tip: Many expenses are a mix of needs and wants—if a bill falls under multiple categories, split its total between them


You’ll find that wants account for a lot of your spending—these are all the non-essential products and services you buy; examples include:
  • Cable/Internet/phone
  • Restaurants/takeout
  • Entertainment
  • Travel
  • Fashion
  • Electronics
  • Subscription services


Savings are any expenses related to debt repayment and savings plans; examples include:
  • Emergency fund savings
  • Student loans
  • Credit card debt
  • Retirement savings
  • Down payments
  • Personal savings goals

Tracking Your Spending

Track your spending for at least two months using the method you’re most comfortable with:
  • Apps
  • Online banking
  • Spreadsheets
Budgeting tip: Don’t forget to factor annual payments into your budget­—divide the annual payment amount by 12 to get the monthly cost.

Compare your monthly spending to your 50/30/20 totals:

  • Needs goal: $1,500 / $1,300
  • Wants goal: $900 / $1,500
  • Savings goal: $600 / $200

Don’t worry if they don’t match up at first—start shifting your spending habits to better align your totals with the 50/30/20 guidelines

Make It Work

If your spending isn’t matching up with the 50/30/20 guidelines, you have a few options:

Reduce your spending: In order to hit the 50/30/20 guideline, you may need to sacrifice some of your wants or find cheaper alternatives for your regular monthly expenses.

Increase Your Income: If you’re consistently overspending and unwilling to compromise, the only solution is to make more money—look for side gigs to increase your income.

Modify Your Percentages: Make sure your budget matches your financial goals—for example, if paying off debt is your top priority, a 30/10/60 budget will get you there faster.

Sources: All Your Worth,

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Related Information: Building a budget

No two budgets are alike. The same expense—whether it’s a book, a phone bill or a tank of gas—can mean different things to different people.

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