The 50/30/20 rule, with examples and 25 savings goals

50/30/20 rule examples by income

Use the pay that reaches your account after taxes. These are examples; put your own number in their place.

• On $2,000 a month: $1,000 for needs, $600 for wants and $400 for savings.
• On $3,000 a month: $1,500 for needs, $900 for wants and $600 for savings.
• On $4,000 a month: $2,000 for needs, $1,200 for wants and $800 for savings.
• On $5,000 a month: $2,500 for needs, $1,500 for wants and $1,000 for savings.
• Earn $500 a month from a part-time job? Save $100 of it every month.

What counts as needs, wants and savings

Needs are the bills you must pay to live and to work. Wants are the rest of your spending. Savings are the money you keep, plus debt you pay off early.

• Write down every cost from last month, and mark each one N for need, W for want or S for savings.
• Add up the needs: rent, groceries, power, insurance, the ride to work and the minimum on each debt.
• Add up the wants: eating out, streaming, trips, hobbies and gifts.
• Find one want you can drop for a month, and move that money to savings.
• Check your needs against half of your pay, and write down the gap if they are over.

The 50/30/20 rule by paycheck: biweekly and weekly

You do not need to wait for the end of the month. Split each paycheck the day it lands. To see a year of deposits laid out, the savings challenge calculator works out the plan.

• Paid $1,400 every two weeks? Move $280 to savings on payday, and keep $700 for needs and $420 for wants.
• Paid $500 a week? Save $100 each week: $5,200 in a year.
• Set an automatic transfer of your 20 percent for the day after payday.
• Paid every two weeks, two months of the year bring a third paycheck. Send each of those to savings.
• Put half of every raise, bonus or tax refund into savings before you spend the rest.

When the 50/30/20 rule does not fit: low income, high rent, debt

The split is a starting point, not a test you pass or fail. If needs take more than half, change the other two numbers and keep saving something. A month of a no spend challenge can show which wants you can live without.

• Needs at 70 percent? Try 70/20/10: on $2,500 a month, that is $1,750, $500 and $250.
• Start by saving 5 percent, and raise it by 5 percent every 3 months until you reach 20.
• Count the minimum on each debt as a need, and pay anything above it out of the 20 percent.
• Cut one need, like a cheaper phone plan or a roommate, and write down what it frees each month.
• Look at the split again every time your pay or your rent changes.

Savings goals for your 20 percent

Give the 20 percent a job, so it does not drift back into spending. Costs that come once a year can go into sinking funds.

• Save one month of needs as a first emergency fund: $1,500 on $3,000 a month.
• Then grow it to three months of needs: $4,500 in the example.
• Save $1,200 for next year's yearly bills: $100 a month.
• Save $2,400 for a trip a year from now: $200 a month.
• Move your 20 percent every month for a year: at $600 a month, that is $7,200.

What is the 50/30/20 rule?

It is a simple way to split the money you take home. Half goes to needs, 30 percent to wants and 20 percent to savings and paying down debt.

The rule is usually credited to Elizabeth Warren and Amelia Warren Tyagi, who described it in their book All Your Worth. It is a rule of thumb, not a law of money. This is general information, not financial advice.

Is the 50/30/20 rule before or after taxes?

After. Use your take-home pay: what lands in your account once taxes are taken out. If you work for yourself, set aside what you owe in tax first, then split the rest.

If money for retirement comes out of your pay before you see it, you can count it as part of your 20 percent. Pick one way and keep it the same each month.

Is the 50/30/20 rule realistic?

For many people, rent alone takes a big share of pay, and needs come to more than half. That does not mean the rule failed. It means your first numbers are different, like 70/20/10.

What matters is that some money is saved on purpose, every payday, and that you can see it grow. If debt is the big weight, these debt payoff goals put the 20 percent to work on it.

How to track your 20 percent

Write down each amount the day you save it, and keep a running total. A review of 138 studies found that people who monitored their progress reached their goals more often, and the effect was larger when the progress was written down.

In Chaltra, make one challenge with your savings target, like $7,200 for the year, and give the emergency fund, the trip and extra debt payments a color each. Every deposit fills the picture a little more. A challenge of up to 30 days is free. A longer one needs Premium.

Frequently asked questions

What is the 50/30/20 rule?

A way to split take-home pay: 50 percent for needs, 30 percent for wants and 20 percent for savings and extra debt payments. On $3,000 a month, that is $1,500, $900 and $600.

Is the 50/30/20 rule before or after taxes?

After taxes. Use the pay that reaches your account, not your salary before taxes.

Where does debt go in the 50/30/20 rule?

One common way: the minimum payment on each debt is a need, and anything you pay above the minimum comes out of the 20 percent.

What if my needs are more than 50 percent?

Change the other two numbers, like 70/20/10, and keep saving something every payday. Raise the savings share when your needs go down or your pay goes up.

Who created the 50/30/20 rule?

It is usually credited to Elizabeth Warren and Amelia Warren Tyagi, from their book All Your Worth.