The 50/30/20 Budget Rule Explained

The 50/30/20 rule is one of the simplest budgeting methods. Here’s how it works:

The Breakdown

50% – Needs: Rent, utilities, groceries, insurance, minimum debt payments
30% – Wants: Dining out, entertainment, hobbies, subscriptions
20% – Savings & Debt: Emergency fund, retirement, extra debt payments

Example on $5,000/month

• $2,500 to needs
• $1,500 to wants
• $1,000 to savings/debt

Why It Works

This framework forces conscious spending decisions while ensuring you save consistently. It’s flexible enough to adjust to your situation.

Getting Started

1. Calculate your after-tax income
2. List all expenses by category
3. Adjust percentages if needed (e.g., 60/20/20 in high-cost areas)
4. Automate the 20% savings first

Adapted from financial planning best practices for NestEggMama families.