50/30/20 Rule: Will It Help You Budget Better In 2022?

The 50/30/20 Rule is a great way to start budgeting your money.

It’s simple – split your after-tax income into needs, wants, and savings. Once you know how much monthly income you have to work with each month, you can set aside money for retirement savings and other expenses.

Keep reading now and learn more about the 50/30/20 budget and how it can help you achieve financial independence!

50/30/20 Rule

The 50/30/20 budget is a simple guide for categorizing your spending to make sure you’re prioritizing what you should be and saving each month.

This guideline suggests dividing your after-tax income into 3 different categories: 50% for Needs (necessities), 30% for Wants, and 20% for Savings and Debt Repayment. 

You can use a budget planner or a budgeting app to help you keep track of your spending and ensure that you’re following the budget.

You first need to know your after-tax income before you start budgeting for your cash flow:

Figuring your monthly after-tax income: This number represents the amount of take-home pay you have to work with each month after taxes have been deducted from your paycheck – in other words, it’s your net income.

503020 Budget Rule Infographic Pie Chart Graph

50% Needs

When figuring out the 50/30/20 budget, one simple rule is to allocate half of your after-taxes income towards necessary expenses and services.

These are the costs that you need to maintain a basic standard of living, things like:

  • Groceries
  • Housing (rent or mortgage payments)
  • Utilities
  • Transportation (gas, car payments)
  • Insurance
  • Child-care

30% Wants

After you determine the Needs, 30% of your net pay goes towards Wants, stuff that makes life enjoyable.

These could include a new outfit, the latest iPhone, tickets to a concert, streaming services, or splurging on dining out.

Since only 30% can go towards all this, you may need to find ways to spend less if your bills are expensive.

One way to help you save on purchases is using Capital One Shopping to try and find available coupon codes and discounts. They partner with thousands of brands, so it never hurts to see if they could save you money!

You can also use other apps like Honey to automatically find and apply coupon codes to your online shopping cart. Using more than one of these cash back apps can help you find the best savings possible.

20% Savings/Investing & Debt Repayment

multiple hands holding up pink piggy bank with coins beneath it

The last of the three categories is Savings and Debt Repayment. In this category, you pay 20% of your take-home income for long-term financial goals

Some of those goals may be contributions to retirement savings, emergency funds, investments, or saving for a down payment on a house.

It also includes any money you put towards paying off your debt, such as student loans, credit card bills, etc.

Prioritizing Investments

Now saving in a high yield savings account can be one of the best accounts for savings, but you should also put your money to work in investing so you can grow more wealth.

Here are a few of our favorite options to start investing with:

Robinhood is a commission-free, hands-on investing app with an easy-to-use interface and many helpful features like unlimited free trades, real-time market data, and advanced charting tools.

Acorns is a great way to save money and start investing by rounding up your purchases to the nearest dollar and transferring the difference into a savings account. Acorns can take that spare change and invest it automatically.

With Betterment, you can easily set up automatic contributions to your investment accounts. With its smart algorithms and advanced investment strategies, Betterment can help ensure that your money grows quickly and efficiently over time.

50/30/20 Example

Let us show you an example of the 50/30/20 Rule that you can copy into your own personal finance plans.

Here are a few easy steps to follow:

  1. Figure the amount of post-tax income you have each month. You add up your income from your job and side hustle money and get $4,500 take-home pay. That’s the max you can spend in a given month.
  2. Use the $4,500 to budget. Taking the percentages, you would get the following breakdown for your budget:
    1. 50% = $2250
    2. 30%  = $1350
    3. 20% = $900
  3. Create the budget around the percentage numbers. Take your bills and expected spending in each category and create a budget for the month.

And here’s what this could look like for your budget:

50-30-20 budget


As you can see, with this example, you’d be under in Necessities and Wants but over in your Savings and Debt Repayment.

You’re total spending estimate is $4,450 of your total income, which is $4,500. It gives you little wiggle room, but if bills or utilities are ever higher, you already have savings built into your budget to help cover extra costs.

You could decide to swap things by reducing your investments in your retirement and spending them on some Wants.

But one thing you shouldn’t forget is that investing will possibly earn you more money in the end.

You’d rather overspend in this category than the others because you will likely save more money for your future and earn more through multiple income streams.

Money Management


There are a few key things to realize when repaying debt and saving:

  1. Create your budget and stick to it. It will help you track what you spend and ensure that you are making progress in repaying debts and saving more money. You may want to use money management apps to help you do this automatically, where you can check it on your phone at any time, or you may prefer to use a pen and paper method like a template.
  2. Negotiate a lower interest rate and cancel unwanted subscriptions and memberships with Trim and Truebill, which can keep your bills lower every month.

Managing your money can be a challenge, especially if you have multiple accounts and expenses. Here are the apps and templates we use to budget our funds:

Personal Capital

One effective and free tool for money management is Personal Capital. This web-based financial tracking platform offers intuitive calculators and graphs to help you easily track your funds.

Whether you are looking to track your retirement savings, monitor your investments, or keep an eye on your bills, Personal Capital makes it easy to stay on top of your financial situation.


Mint is a free budget tracker and planner that gives you a complete overview of your financial situation.

You can connect all of your bank accounts, credit cards, retirement savings, and investment accounts to Mint, and the service will track what you spend and give you insights into where your funds are going.

Savvy Free Printable

The Savvy Free Printable is an essential tool for anyone trying to create a successful budget. Whether you’re just starting or looking for ways to optimize your budget, this printable can help you make the most of your income.

Just download, print it out and use the template based on your own needs and income level.

Excel Spreadsheet

You can use an Excel spreadsheet as personal finance software to create a detailed, customized 50/30/20 budget to manage your income. It’s something you can create once and copy and paste it every month to automate it easy peasy.

The rows and columns in a spreadsheet provide a flexible yet straightforward format to track your progress over time easily, and you don’t have to do any math yourself- just use formulas to get the totals!

Final Thoughts

more budgeting

The 50/30/20 budget is a great way to stay on top of your finances, make progress in repaying debts, and save more. It can be a little challenging to follow at first, but you can create a successful budget that works for you with a bit of effort.

Frugal living is essential for anyone trying to stick to a 50/30/20 budget, and there are many resources out there to help you spend less and get the most out of your finances.

Whether you’re looking for tips on how to cut back on spending or you want to learn about tools for money management, there is something available that can help you achieve your financial goals.

So why not give the 50/30/20 budget a try and see how it can help you gain confidence and achieve financial success?