What is the 50/30/20 budget rule?

Modified on Sat, 06 May 2023 at 12:48 PM

The 50/30/20 budget rule is a popular guideline for managing personal finances and budgeting. 

It suggests allocating your after-tax income into three categories: needs, wants, and savings. Here's how it breaks down: 

  • 50% for Needs: This category includes essential expenses that are necessary for your basic living needs, such as rent/mortgage, utilities, groceries, transportation, health insurance, and other bills. It's recommended to spend no more than 50% of your after-tax income on these necessities. 
  • 30% for Wants: This category covers discretionary spending or non-essential expenses that you enjoy but are not critical for your basic needs. This can include dining out, entertainment, hobbies, travel, and other discretionary spending. The rule suggests limiting your wants spending to 30% of your after-tax income.


  • 20% for Savings: This category emphasizes saving and investing for your future financial goals. It includes saving for emergencies, retirement, investments, debt payments, and other financial objectives. The rule advises putting at least 20% of your after-tax income towards savings and debt payments.

It's important to note that the 50/30/20 budget rule is a guideline and may not work for everyone. Personal financial situations vary, and it's crucial to customize your budget based on your individual circumstances and financial goals, where TimelyBills make it quite easily to customize your personal and family level budgeting. 

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