With our budgeting calculators, you can apply the popular 50/30/20 savings rule to your finances to help you achieve your savings goals.
This 50/30/20 method, or 50/30/20 rule, is a popular strategy for budgeting monthly income. With this method, your money is allocated into three categories: needs, wants and savings and debt. Here’s how it works.
Your needs include costs like the following, which you must pay monthly as part of your regular expenses. Monthly rent or mortgage payments groceries, and utility bills are everyday necessities. These expenses account for 50% of your net monthly pay under the 50/30/20 rule.
Wants, also called discretionary spending, are optional costs that account for part of your monthly expenses. These costs might include things like dining out, trips to the movies or weekends away. Wants account for 30% of your monthly income after taxes under the 50/30/20 method.
The 50/30/20 method allocates 20% of your net monthly pay toward savings and debt repayment. You might use a portion of this 20% to repay credit card debt each month, some for retirement savings and the rest to grow your emergency fund.
To use our budget calculator, you’ll first want to determine your monthly income after taxes, also called your take-home pay. This number serves as the basis for your 50/30/20 calculation, and it’s the amount you receive each month after taxes and other costs are deducted from your paychecks. Here’s a step-by-step example of how you might budget if you’re paid bi-weekly.
Once the calculator has allocated 50% of your budget to necessary costs, you can break down these costs even further into common categories like:
Your wants include discretionary spending, which aren’t essential costs but are still an important part of your budget. Our budgeting calculator will allocate 30% of your monthly net income toward needs, and you can then decide how that 30% will be allocated. Common examples of wants include:
While your expenses are important, your savings are arguably more important. This is especially true if your goal is to save more money. Our calculator will break down 20% of your monthly income after taxes into savings, but your savings goals might be different depending on your situation. You can break down this 20% into different categories that best align with your goals. Potential categories could include:
Use our 50/30/20 budget calculator as a starting point for managing your money. This budgeting method offers some flexibility, making it suitable for many people. If you’d like to be more hands-off with budgeting, you can simply allocate 50% of your monthly pay toward essential costs, 30% toward non-essential costs and 20% toward savings and debt repayment.
You can also drill down further if you’d prefer to be hands-on and allocate funds to more specific categories. For instance, you might put half of your 50% monthly allocation toward housing expenses and a quarter toward food and personal expenses.
While the 50/30/20 budgeting method is popular, many other budgeting options are available. Each option starts with figuring out your net monthly income and monthly expenses, though actual budgeting approaches differ depending on your chosen strategy.
Pay yourself first: With this simple budgeting method, your first contribution from your monthly paycheck goes toward savings. The remainder goes toward your bills and other expenses.
Budgeting can give you a better understanding of your spending and serve as the foundation for growing your savings. The 50/30/20 method is a popular budgeting strategy, but it isn’t necessarily the best system for everyone. Fortunately, several approaches exist if your goal is to develop a budget.
If you’re already following a budget and want help building your savings, try our savings calculator.
50/30/20 Budget FAQs
A 50/30/20 budget calculator can help allocate your net monthly income into wants (50%), needs (30%) and savings and debt repayment (20%). You can also allocate your net monthly income into these categories on your own if you choose.
The 50/30/20 rule applies to net monthly income or your monthly income after taxes. Your gross income won’t factor into this budgeting method.
While the 50/30/20 method is simple and flexible, it’s not necessarily the right budgeting option for everyone. Some alternatives to this method include:
The best way to start saving depends on your situation and preferences. But in general, putting small amounts of money into your savings each month is a good way to start. The right budgeting method can help you understand how much to set aside monthly.
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