The 50 30 20 Rule

According to the 50/30/20 rule, 50% of your income should go toward things you need, 30% toward things you want, and 20% toward savings and debt repayment.

You might initially have to adjust your budget until you can align with this recommendation. Use our free monthly budget template below to ensure that your monthly budget is set and spent according to the recommendations.

50 30 20 Budget

Our free monthly budget sheet will show you how much you should be spending and how much you should be saving. It will also help you divide your expenses between necessities and things you want.

The 50 30 20 Rule

What is the 50 30 20 rule?

The 50/30/20 rule helps you divide your monthly after-tax income into three categories: needs (50%), wants (20%), and savings or paying off debts (20%).
When you keep your expenses balanced according to these guidelines, it helps you stay on track without spending too much time allocating your budget. It ensures that you are saving enough and not spending too much.

The problem with complicated budgets is that people often stop using them when they are too time-consuming or too complicated. The 50-30-20 budget rule is a simple alternative that offers a quick solution to control your monthly budget and reach your financial goals.
You might need to adjust the percentages based on your personal situation.

What is the origin of the 50/30/20 rule?

The 50/30/20 rule originated in the book “All Your Worth: The Ultimate Lifetime Money Plan,” written by US Senator Elizabeth Warren and her daughter (Amelia Warren Tyagi).

50 30 20 Calculator

Use this 50/30/20 rule calculator to calculate how much money you should spend each month on needs and wants and how much you should save.

The 50 30 20 Rule

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How to use the 50/30/20 rule calculator

1. Calculate your after-tax income

In order to use the 50/30/20 calculator, you need to know how much you earn after taxes. That is basically your take-home pay unless certain expenses such as health care or retirement pavements are automatically deducted from your paycheck.

  • If you are an employee, your after-tax income will be the amount that you receive each month after your employer deducts taxes. If certain payments such as health insurance, retirement plan, or pension funds are deduced then add them to the income and make a note of the amounts to add to the needs (health insurance) and savings (pension funds).
  • If you are a business owner, then deduct your business expenses and taxes from your income.

2. Divide your expenses and spending into three categories:

The budgeting worksheets below will help you divide your expenses and spending into three categories.

Needs – 50%

Needs are necessities or things that you cannot easily live without, such as monthly rent or mortgage payments, minimum load repayments, food, transportation, car payments,  insurance, and utility bills (electricity, gas, internet).
If your needs add up to more than 50% of your after-tax income, try to bring your expenses down.

Wants – 30%

Wants are things that you want but don’t actually need such as vacations, hobbies, entertainment (such as Netflix, movies, concerts, cable TV), dining out, non-essential groceries, new clothes, gym membership, and non-essential expenses.
In order to know if something is a need or a want, ask yourself if you could live without it. If the answer is yes, then it is probably a “want”.

Savings and/or paying off debts – 20%

This category includes things such as retirement savings, rainy-day funds, college funds, debt payments, emergency funds, or payments for a house.
In order to ensure you devote this part of your income to savings or debt payments, it is best to automate these payments. Set up a savings account or a retirement account and set up automatic payments each month.

50 30 20 Budget

The following 50/30/20 budget spreadsheet will calculate how much you should allocate to each category and the actual vs budgeted expenses each month.

50 30 20 Budget

How to Calculate your 50 30 20 Budget

Using the 50/20/30 Budget Calculator:

Use the 50-30-20 rule calculator above to calculate how much money should be allocated to each section. You will need to enter your after-tax income into the 50 30 20 rule calculator to calculate this.

Using the 50 30 20 Budgeting Spreadsheet:

You can also use the 50 20 30 budget template below to calculate the allocation.

50 30 20 Spreadsheet

How to Create a 50/30/20 Budget Template Google Sheets
  1. Click on the button above to open the 50 30 20 spreadsheet.
  2. Save the spreadsheet file on your PC.
  3. Open Google Sheets.
  4. Open the Excel file. It will be converted to Google Sheets.

50 30 20 Budgeting

  1. Once you have calculated your target budgets (see above), you need to compare your expenses to see if they are aligned with these allocations. Use our free printable budget worksheet to align your budget with this rule.
  2. Divide your expenses into needs, wants, and savings and record them in the expense tracker.
  3. Calculate the total for needs, wants, and savings. If you use the 50 30 20 spreadsheet, then it will calculate the totals for you.
  4. Compare the total for needs, wants and savings to the total you were supposed to reach.
  5. If your wants or needs categories are higher than they should be then you will need to check your expenses and see where you can cut down.
  6. The first place to cut down is from your wants category.
  7. If your savings do not reach the 20% minimum then you will need to cut down on your wants until you reach the 20% minimum for savings.

50 30 20 Spreadsheet

If you want to calculate your expenses without sticking to the 50-20-30 rule then check out our selection of free expense tracker templates to track your expenses.