Budgeting comes down to tracking how much you earn compared to how much you spend – and how much you want to save. While budgeting can seem like a chore at times, there are a few simple methods that can help you track your spending and stay focused on your goals. To use the 50-30-20 budget method, you’ll start by looking at your monthly expenses.
What Is the 50/30/20 Rule?
The 50/30/20 budget is an easy way to focus your budgeting goals. To get started, you will sort your expenses into three buckets — your needs, wants, and savings. Here’s how it works:
50% for your needs
Half of your income should go toward essentials or necessities, such as housing (including mortgage or rent), groceries, transportation, healthinsurance, and the minimum payment on your debts, such as student loans.
30% for your wants
This portion of your income can go toward purchases you want but don’t necessarily need, such as travel, dining out, entertainment, or shopping.
20% for your savings
The rest should go toward your savings, including any investments or retirement accounts, building your emergency savings, or making additional debt payments (after your minimum payments).
Calculating your target budget
What does this look like? If you make $3000 a month after taxes, then 50% ($1500) would go toward needs, the next 30% ($900) goes toward your wants or discretionary spending, and the remaining 20% ($600) goes toward your savings.
While keeping track of your budget may seem complicated, a simple method, like the 50-30-20 rule can help understand where your money is going. And if you have a specific savings goal in mind, such as saving for a wedding, emergency fund, or vacation, your budget can help you stay on target to reach that goal.
The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.
For many people, the 50/30/20 rule works extremely well—it provides significant room in your budget for discretionary spending while setting aside income to pay down debt and save. But the exact breakdown between “needs,” “wants” and savings may not be ideal for everyone.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment. Find out how this budgeting approach applies to your money.
Allocate 50% of your $3000 to your needs, 30% to your desires, and 20% to your savings. But remember, these percentages are just a guideline and not a hard and fast rule to follow. Be flexible. Do it if you need to allocate more than 50% to your needs or cut back on savings.
For a worksheet: Total Direct Costs = Salary & Benefit Costs Total + Other Costs Total.
For the Budget Summary: Total Direct Costs = sum of TDC for all worksheets. Expand the section to see additional details. Total Direct Costs less Subrecipient F&A.
But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they're struggling to make ends meet. Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.
It may not work for everyone. Depending on your income and expenses, the 50/30/20 rule may not be realistic for your individual financial situation. You may need to allocate a higher percentage to necessities or a lower percentage to wants in order to make ends meet. It doesn't account for irregular expenses.
Many people find it hard to allocate 20% of their income toward savings. If you live in a large metropolitan area with a high cost of living, it may be difficult or impossible to include all your needs with only 50% of your income.
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
The 60-20-20 budgeting rule offers a straightforward and effective approach to managing your finances on a $60,000 salary. By dividing your income into clear categories and sticking to these limits, you can ensure that you're covering your essentials, saving for the future, and still enjoying the present.
In his free webinar last week, Market Briefs CEO Jaspreet Singh alerted me to a variation: the popular 75-15-10 rule. Singh called it leading your money. This iteration calls for you to put 75% of after-tax income to daily expenses, 15% to investing and 10% to savings.
50% for your needs. Half of your income should go toward essentials or necessities, such as housing (including mortgage or rent), groceries, transportation, health insurance, and the minimum payment on your debts, such as student loans.
A popular savings rule of thumb in which 50% of your income goes towards necessities (groceries, rent, utilities), 20% goes towards savings, debt, and investments, and 30% goes towards flexible spending.
50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).
The online 50-30-20 calculator divides your monthly income into necessities, wants and savings. A classic rule of thumb is to split your monthly salary as follows: 50% goes into necessities (essential expenses such as rent and bills) 30% goes towards wants (such as food, activities, subscriptions and petrol)
First, subtract the budgeted amount from the actual expense. If this expense was over budget, then the result will be positive. Next, divide that number by the original budgeted amount and then multiply the result by 100 to get the percentage over budget.
50% for your needs. Half of your income should go toward essentials or necessities, such as housing (including mortgage or rent), groceries, transportation, health insurance, and the minimum payment on your debts, such as student loans.
Introduction: My name is The Hon. Margery Christiansen, I am a bright, adorable, precious, inexpensive, gorgeous, comfortable, happy person who loves writing and wants to share my knowledge and understanding with you.
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