The 50/30/20 Budget Rule: A Simple Way to Manage Your Money

The 50/30/20 rule is a simple budgeting framework popularized by Senator Elizabeth Warren. It organizes your spending into three clear buckets to help you manage your money effectively without complex tracking.

Key Takeaways

50% of income goes to needs: rent, utilities, groceries, transportation
30% goes to wants: dining out, entertainment, hobbies, subscriptions
20% goes to savings and debt payoff—pay yourself first
This simple framework eliminates complex tracking while building wealth
Adjust percentages based on your situation—high cost of living may need 60/20/20

1. 50% for Needs

Half of your after-tax income should go towards the things you absolutely need to survive and function. This includes:

Rent or mortgage payments
Utilities (electricity, water, internet)
Groceries (not dining out!)
Transportation to work
Insurance premiums
Minimum loan payments

⚠️ Warning

If your needs exceed 50% of your income, it can be difficult to make progress on other goals. Consider if major changes like downsizing or finding a cheaper commute are necessary.

2. 30% for Wants

This is the fun part! 30% of your income can be spent on discretionary items. Currently, you might be spending more here than you realize. Wants include:

Dining out and ordering takeout
Entertainment (movies, concerts, streaming services)
Hobbies and gym memberships
Vacations and travel

3. 20% for Savings & Debt

The final 20% is for your future. This is the most critical category for building financial freedom. Use this money for:

Building an emergency fund (aim for 3-6 months of expenses)
Investing for retirement (pension, ISA, etc.)
Paying off high-interest debt faster (above minimum payments)

Try Our Free 50/30/20 Calculator

See exactly how your income splits according to this rule in seconds.

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How to Get Started

First, calculate your after-tax income. Then, look at last month's bank statement to categorize your spending. Finally, make adjustments to fit the percentages.