Financial wellness isn’t just about saving money—it’s about knowing where your money is going and why. In a world filled with auto-renewing subscriptions, social media-fueled spending, and side hustles, understanding how to manage your income is more important than ever.
Enter the 50/30/20 rule: a timeless budgeting strategy that’s still going strong in today’s digital-first, inflation-aware world.
What Is the 50/30/20 Rule?
Think of it as a smart, simple framework for managing your after-tax income:
50% goes to needs
30% to wants
20% to savings and debt repayment
his rule offers an easy way to check in with your spending and start aligning your budget with your goals—without needing a finance degree or a spreadsheet obsession. Originally introduced by Elizabeth Warren in her book titled, All Your Worth: The Ultimate Lifetime Money Plan, it is now a widely used concept for people looking to plan their spending and reach long and short-term financial goals.
Get Techy With Your Budget
Before you begin analyzing your finances, consider budgeting apps that make money tracking easier. Today’s top tools include:
Copilot Money (for iOS users who love visuals)
Rocket Money (for subscription tracking and bill negotiation)
YNAB (You Need A Budget) (for zero-based budgeting fans)
Monarch Money (great for couples and long-term planning)
- PocketGuard (all-in-one money management platform)
These apps sync directly with your bank accounts, automatically categorize expenses, and help you visualize where your money is going—no guesswork needed. These apps also allow you to create goals, such as paying down debt or saving for a new car and provide guidance on realistic timelines to reach them.
Now for the real work.
How to Use the 50/30/20 Rule (in Real Life)
The first step of the rule is to calculate your monthly net income – this is the amount you take home after taxes (or the amount listed on your paycheck after deductions). This is the total you’ll use to divide into 50%, 30%, and 20%.
50%: Essentials
This is your survival category. It includes rent or mortgage, utilities, health insurance, car payments, groceries, and minimum debt payments. Remember, categories such as eating out are not considered necessary (you can cook at home!) and should live in the 30% section of your budget.
Tip: If your rent is more than 30% of your income (as is common in many U.S. cities), you may need to adjust other categories. Consider house hacking (renting a room), relocating, or even remote work opportunities to balance things out.
30%: Wants (aka Lifestyle)
This is where lifestyle creep often sneaks in. Dining out, travel, streaming subscriptions, Uber rides, online shopping, gym memberships—fun stuff, but not essential.
The wants and desires category is where it’s easiest to get off track. Spending like this can be fun, but it’s essential to understand that spending in this category should not be an everyday occurrence. If you find yourself overspending in this category, it may be time to cut out some expenses.
Tip: Audit your subscriptions every few months. Use tools like Rocket Money to cancel unused ones. Ask yourself: “Does this still bring me value?” You don’t have to cut every single non-essential expense out of your budget, but if you take the time to comb through it, you’re bound to find things to nix.
20%: Savings + Debt Payoff
This is your long-term win zone. It includes building your emergency fund, investing in your 401(k) or IRA, saving for a big goal (like a car or house), or aggressively paying off high-interest debt. This budget category is set aside for savings and debt payoff and often looks different for everyone. All savings, such as saving for a new car or vacation, retirement accounts, or even college can be assigned to this category.
Tip: Automate it. Set up automatic transfers to savings or retirement accounts so you don’t “accidentally” spend what you meant to save.
Ways to Boost Savings
Use AI tools like Cleo or Emma for smart spending insights and as a financial assistant.
Sell unused items on Poshmark, Depop, or Facebook Marketplace.
Take on micro-gigs: Dog sit with Rover or deliver for DoorDash.
Make saving social: Join a savings challenge on TikTok or with friends.
Monetize your hobbies: Got a knack for baking, photography, or editing? Turn it into extra cash.
Make a grocery list…and stick to it.
- Pack your lunch for work or school.
Flex the Rule to Fit Your Life
Like most things in life, the 50/30/20 rule is not one-size-fits-all, and different budgets can call for different strategies. While it can help everyone stay on track, the breakdown can look different depending on your income and goals.
As a general rule of thumb, your budget should be broken down into similar percentages. Budgeting doesn’t have to mean restriction—it’s about intention. Paired with the right tools, a little creativity, and a willingness to reassess, it can help you move from paycheck-to-paycheck to financially empowered.
