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50/30/20 rule

Also called: 50/30/20 budget, 50/20/30 rule

The 50/30/20 rule is a budgeting guideline that divides after-tax income into three parts: about 50% for needs, 30% for wants and 20% for savings and debt repayment. It is one rule of thumb to compare against, not a requirement.

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How it works

The split starts from take-home pay, the money that reaches your account after taxes and payroll deductions. Needs are costs that are hard to avoid, such as rent or a mortgage, utilities, groceries, transportation, insurance and child care. Wants are the optional extras, such as eating out, entertainment, travel and upgrades. The final 20% goes to goals such as emergency savings, retirement and paying down debt.

Versions of the rule differ in the details, so it helps to decide once and stay consistent. One question is where debt payments belong; a CFPB worksheet groups them with savings in the 20%. Another is retirement money taken out before your pay arrives: it does not appear in take-home pay, so choose whether to count it toward the 20% and treat it the same way every month.

The percentages are a benchmark, not a pass-or-fail test. Where housing costs are high or income is lower, needs can take well over half of take-home pay, and a different split may be more realistic for a while. Used as a quick check, the rule can flag imbalances, such as wants far above 30% or nothing reaching savings, and help you choose a personal split that fits.

Try it with your own numbersBudget CalculatorFree 50/30/20 budget calculator. Enter take-home pay and monthly costs to see your split across needs, wants and savings, and what is left to assign.

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Sources and further reading

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.

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