The 50/30/20 Budget Rule Explained

The 50/30/20 rule is one of the most popular budgeting frameworks because it's simple, flexible, and actually works. Here's everything you need to know.

What Is the 50/30/20 Rule?

It's a simple way to divide your after-tax income:

• 50% on Needs: Essentials you can't avoid — rent/mortgage, utilities, groceries, insurance, minimum debt payments, transport to work
• 30% on Wants: Non-essentials that improve your life — entertainment, dining out, hobbies, subscriptions, new clothes
• 20% on Savings: Future you — emergency fund, retirement, investments, extra debt payments

A Practical Example

Let's say your take-home pay is $5,000/month:

• Needs (50%): $2,500 for rent, groceries, utilities, transport
• Wants (30%): $1,500 for entertainment, restaurants, shopping
• Savings (20%): $1,000 toward emergency fund or investments

When to Adjust the Ratios

The 50/30/20 split isn't law — it's a guideline. You might need to adjust based on your situation:

• High cost of living area? Your needs might be 60%, leaving 20/20 for wants and savings
• Aggressive debt payoff? Try 50/20/30 with the extra going to debt
• High income? Consider 40/30/30 to supercharge your savings

How to Track Your 50/30/20

The easiest way is to categorize your expenses and check the totals at month end. With MyBudgetLog, you can assign each transaction to a category and see your spending breakdown in a visual chart.