50/30/20 Rule Calculator

A simple way to manage your income by allocating 50% to needs, 30% to wants, and 20% to savings.

What is the 50/30/20 Rule?

The 50/30/20 rule is a simple budgeting guideline that allocates your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings. It's an effective way to manage personal finances, ensuring a balance between essential expenses, discretionary spending, and saving for the future.

How to Use the 50/30/20 Rule

To follow the 50/30/20 rule, calculate your after-tax income. Then, allocate 50% of that to needs like housing, food, and transportation. Allocate 30% to wants, which includes entertainment, dining out, and hobbies. Finally, reserve 20% for savings or paying off debt.

Example of 50/30/20 Rule

Let’s say your monthly income is $4,000. According to the 50/30/20 rule, you would allocate $2,000 (50%) for needs, $1,200 (30%) for wants, and $800 (20%) for savings. This ensures a balanced approach to budgeting that covers essentials while allowing for discretionary spending and savings.