The 50/30/20 Budget: A Simple Guide (and Free Template!)

*This post may contain affiliate links, please see my disclosure

What Is The 50 30 20 Rule?

The 50 / 30 / 20 Rule was first coined by Elizabeth Warren and her daughter in her book All Your Worth: The Ultimate Lifetime Money Plan. It’s a simple rule to give a general guideline on how to budget your money.

Here’s a breakdown of how it works:

  • 50% of your income goes toward your “Needs” (Housing, Groceries, Utilities, Transportation, Bills, Insurance, Debt Minimum Payments, etc.)
  • 30% of your income goes toward your “Wants” (Shopping, Entertainment, Restaurants, Hobbies, Etc.)
  • 20% of your income goes toward Debt Payoff and Savings

Note: This budget is for your after-tax pay. According to the book, your 401k should be included in the 20% for savings, but since your 401k is deducted before you get your paycheck, it makes way more sense to budget on your take-home pay instead.

Let’s walk through an example of how this would look in a monthly budget.

50 30 20 budget graph

How To Set Up A 50 / 30 / 20 Budget

Step 1: Figure out your total monthly income

For this budget, you need to figure out your total monthly take-home pay. For those paid bi-weekly, this will be the total of 2 paychecks.

Example: Brittney gets paid $2,000 every 2 weeks. Her total monthly income that she will budget based on is $4,000.

Step 2: Split your income between the 3 categories

Using the percentages, Brittney is going to take her $4,000 income, and split it up 3 ways.

Here’s what her budget is going to look like:

$4,000 x 50% = $2,000 for NEEDS

$4,000 x 30% = $1,200 for WANTS

$4,000 x 20% = $800 for SAVINGS / DEBT PAYOFF

Step 3: Adjust Your ACTUAL Spending To Fit

This is where the rubber meets the road. Brittney will need to take a look at her current spending and then ADJUST her life to fit the 50 / 30 / 20 guidelines.

Here’s what her ORIGINAL spending might look like in her life:

NEEDS $2,175 ($125 over)
Rent $950
Groceries $300
Car Payment $400
Household $100
Utilities $150
Car Insurance $100
Phone $75
Internet $50
WANTS $1,300 ($100 over)
Restaurants $300
Entertainment $100
Shopping $200
Spending Cash $200
Gifts $100
Travel $300
Gym $50
Subscriptions $50 (Amazon, Hulu, Netflix)
SAVINGS / DEBT $600 ($200 under)
Car Loan $300
Credit Cards $200
Roth IRA $100

As you can see, Brittney is currently overspending on her NEEDS and WANTS, and is not putting enough toward her debt payoff and savings to fit the 50 / 30 / 20 rule.

She can adjust her current spending to fit the rule, her updated budget would look like this:

NEEDS $2,000
Rent $950
Groceries $225 (meal planning!)
Car Payment $400
Household $100
Utilities $150
Car Insurance $75 (Geico baby!)
Phone $50 (Republic Wireless!)
Internet $50
WANTS $1,200
Restaurants $250 (using Groupon for deals!)
Entertainment $100
Shopping $150 (more shopping online + Rakuten cash back!)
Spending Cash $200
Gifts $100
Travel $300
Gym $50
Subscriptions $50 (Amazon, Hulu, Netflix)
Car Loan $500
Credit Cards $200
Roth IRA $100

Now Brittney’s budget is in line with the 50 / 30 / 20 rule, and she can put more toward debt payoff on her car loan to pay it off MUCH quicker!

How Do You Pay Off Debt With A 50 / 20 / 30 Budget?

The problem with this budgeting method is that is doesn’t give any clear guidelines on HOW to pay off your debt. It simply states that 20% of your income go toward debt payoff and savings.

I believe this is NOT enough to REALLY pay off your debt. I think you should bring your WANTS down a minimum, and pay AS MUCH AS POSSIBLE on your debt to get it GONE quickly.

As for HOW to do this, I personally used and recommend the Debt Snowball Method to tackle your debts and build momentum to keep going!

Who Is This Budget Method For?

This budget is for people who need a QUICK way to measure how they are doing. Americans save less than 10% of their income, so pushing that up to 20% is a MUCH IMPROVED figure, and can give you boost to your net worth.

If you build a budget that works with this method, you are probably being VERY frugal with your NEEDS, and choosing cheaper housing and transportation options than most.

This budget works best for those who are working professionals, age 22-34, and make more than $40,000 per year, but under $100,000 per year.

There are a few reasons for this:

  • If you are younger than 22 and are still in college, your income will most likely not allow you to use this method. Also, your expenses are (hopefully) much less and spending 50% on NEEDS may be excessive.
  • If you are over 34 years old and haven’t paid off debt, saved or invested much, you might need to put MORE than 20% of your income toward those things
  • If you make less than $40,000 per year, spending only 50% of your income on NEEDS is probably unrealistic. If you make over $100,000 per year, spending 30% of your income on WANTS is excessive.

Also, this is not a FOREVER budget option. As your income, family, or location changes, simply applying these percentages to your budget is NOT realistic.

Instead, learn the core principles of How To Budget and apply them to YOUR unique situation.

What Budget Apps Work With The 50 / 30 / 20 Rule?

If you want to use this budget method with your favorite budgeting app, here are the ones that can help you see if you’re following the 50 / 30 / 20 Rule:

YNAB (You Need A Budget)

YNAB is currently my FAVORITE budgeting app, and is a great way to organize your 50 / 30 / 20 budget.

You can create 3 Sections for this budget (NEEDS, WANTS, SAVINGS/DEBT) and organize your budget categories into those 3 buckets.

The place to see your 50-30-20 percentages is under the “Reports” tab. You can look at your monthly spending, and see how close you are to the 50% NEEDS, 30% WANTS, 20% SAVINGS rule.

Try YNAB Free for 34 Days

Or check out our complete YNAB Review.


Mint.com is a FREE money management tool that helps you create a budget, track your spending, track your bills, set money goals and see a full snapshot of your finances. It is owned by Intuit, the same company that brought you Quicken and TurboTax. It is ad-supported, so there is no monthly cost to use it.

Similar to YNAB, Mint has a reporting section called “Trends”. You can look at your spending, and hover over each section to see your “Percentage”. And if you have 3 Budget Categories, the graph should look very simple and show how much and what percentage you spent on each.

You can read my full review on Mint here.

Personal Capital

Personal Capital is a free app that tracks your spending and helps you stay on top of your finances. It will sync with all your financial accounts, and automatically create a budget to show you where your money is going.

As you categorize your transactions, you can simply create 3 categories (NEEDS, WANTS, SAVINGS), and then put everything in those 3 buckets. Personal Capital will then give you a nice summary of your spending and show you the breakdown by dollars.

You can try Personal Capital for FREE here


EveryDollar is Dave Ramsey’s budgeting app, and uses his “Baby Steps” to help people get out of debt and start saving. This app shows you the percentage of income spent for each budget category.

If you simply narrow it down to the 3 categories (NEEDS, WANTS, SAVINGS), then you can start budgeting inside those, and it will show you VERY CLEARLY exactly what percentage you are at.

You can try Everydollar for free HERE

50 / 30 / 20 Budget Pros

There are some awesome things about using this method:

  • It’s easy. Simply plug in your spending, and adjust to fit the percentages. It’s a quick way to get an overview of how you are doing with your money. If you’ve never put together a budget, this is a great starting point.
  • It makes Savings a priority. Putting away 20%, especially starting at a young age, it a really good amount, and if invested in low-cost Index Funds, can get you to $1 Million by retirement!
  • It lets you ENJOY some of your money. 30% of your income lets you spend on what you WANT, making this budget a lot of FUN.

50 / 30 / 20 Budget Cons

There are also some things I don’t like:

  • It’s TOO vague. The rule doesn’t take in to consideration your age, your location, your debt and your income. If generally applied this advice to people who are drowning in debt, or on the opposite end, have a HIGH income, it would be WAY OFF.
  • It doesn’t show you areas of WASTE. With a simple 30% bucket of WANTS, if you lump all that spending together, there’s no way to see where you might be WASTING. You might be WAY overspending on restaurants, but wouldn’t see it with this method.
  • There’s no order of operations. For the 20% category, it doesn’t spell out if you should pay off debt, or invest first. It’s just a catch-all for YOU to figure out.
  • It is NOT great if you have LOTS of debt. Honestly, 20% is NOWHERE near enough to put toward debt if you REALLY want it gone fast! I would say you need to take another 20% from your WANTS category and ALSO put that on your debt.

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

Leave a Comment