50/30/20 Budgeting Rule: What Is It [Complete Guide]

Are you struggling to stay on track with your budget? Tired of comparing all the detailed categories? The 50/30/20 budgeting rule can be a great tool to keep  you going!

When you have a budget, the next step is comparing how your budget compares to the ‘ideal’ saving and spending. That’s exactly what the 50/30/20 rule  is for.

What Is The 50/30/20 Rule?

– 50% on needs, like groceries, utilities, and housing costs – 30% on wants, which includes all luxuries – 20% towards debt and savings.

When you’re wanting to use the 50/30/20 budget rule, there are a few things you need  to do.

How To Use The 50/30/20 Rule?

Doing this is simple if you have a regular paycheck month-to-month. You take your paycheck and exclude all taxes and social security contributions.

Step 1: Calculate Your Income After Tax

Anything that you need, are things that you need to pay every month otherwise your quality of life will suffer.

Step 2: Get Your Needs To 50%

Things that fall into this category are optional, things that you can live without but would rather not.

Step 3: Get Your Wants To 30%

At least 20% of your after-tax income should go to repaying various debts and saving  or investing.

Step 4: Spend 20% Of Your Income Towards Savings And Debt