Answer
What is the 50/30/20 rule?
It’s a budget that puts 50% of take-home pay toward needs, 30% toward wants and 20% toward savings and extra debt payments: on $4,000 a month that’s $2,000, $1,200 and $800 to savings.
50/30/20 at different incomes
| Take-home pay | Needs | Wants | Savings and debt |
|---|---|---|---|
| $2,000 | $1,000 | $600 | $400 |
| $3,000 | $1,500 | $900 | $600 |
| $4,000 | $2,000 | $1,200 | $800 |
| $5,000 | $2,500 | $1,500 | $1,000 |
| $6,000 | $3,000 | $1,800 | $1,200 |
| $7,500 | $3,750 | $2,250 | $1,500 |
| $10,000 | $5,000 | $3,000 | $2,000 |
Where it comes from
Elizabeth Warren and her daughter Amelia Warren Tyagi popularized it in their 2005 book All Your Worth. They based it on after-tax income.
Needs, wants and savings
Needs: housing, utilities, groceries, insurance, transport, childcare, minimum debt payments. Wants: eating out, subscriptions, travel, hobbies. Savings: emergency fund, retirement, and debt payments above the minimum.
More questions
Is 50/30/20 realistic?
For many families needs run above 50%, especially with high rent. Use it as a target: protect the 20% if you can and trim wants first.
Does 401(k) money count?
Yes, retirement contributions count toward the 20%, even if they come out before your paycheck.
Citing this? Link to https://tools.tidyandtended.com/answers/what-is-the-50-30-20-rule/. Free to reuse with a link (CC BY 4.0).
Save to Pinterest · Download the pin image
