The 50/30/20 Budget Rule: The Simplest Way to Manage Money
Budgeting is often overcomplicated. Spreadsheets, receipts, categorization fatigue—it's enough to make anyone quit. Enter the 50/30/20 rule, a simplified budgeting framework popularized by Senator Elizabeth Warren.
The concept is simple: take your after-tax income (what actually hits your bank account) and split it into three buckets.
50%
Needs
30%
Wants
20%
Savings
1. Needs (50%)
These are the bills you absolutely must pay to survive and work. If you lost your job tomorrow, these are the expenses you'd still have to worry about.
- Rent or Mortgage
- Utilities (Electricity, Water, Internet)
- Groceries (Not dining out!)
- Transportation (Car payment, gas, insurance)
- Minimum debt payments
2. Wants (30%)
This is the fun stuff. It's the lifestyle choices that make life enjoyable but aren't strictly necessary for survival.
- Dining out & Coffee
- Netflix, Spotify, and subscriptions
- Holidays & Travel
- New clothes (beyond basics)
3. Savings & Debt (20%)
This is how you get ahead. This bucket is for your "Future Self."
- Emergency fund contributions
- Retirement investing (401k, Roth IRA)
- Extra debt payments (above minimums)
🧮 Calculate Your 50/30/20 Split
Not sure what your numbers look like? Enter your monthly income into our free calculator to see your personalized budget instantly.
Use the Budget Calculator →Why It Works
The 50/30/20 rule works because it's flexible. It doesn't tell you that you can't buy a latte. It just says that your lattes + Netflix + tacos shouldn't exceed 30% of your take-home pay.
If your "Needs" are over 50% (which is common in high cost-of-living areas), you have a clear goal: try to increase income or reduce housing costs, or temporarily borrow from the "Wants" bucket.