The 50/30/20 Rule Explained: A Simple Budget That Works

Budgeting doesn’t have to be complicated. The 50/30/20 rule is one of the simplest ways to take control of your money without spreadsheets or stress.

What is the 50/30/20 Rule?

It’s a framework for spending your income:

• 50% on needs (housing, food, transportation, insurance)
• 30% on wants (entertainment, travel, eating out)
• 20% on savings and debt repayment

Why It Works

The simplicity makes it powerful. Instead of guessing, you get clear limits on spending and saving.

How to Start

1. Calculate your after-tax income.
2. Multiply by 0.5, 0.3, and 0.2 to get your categories.
3. Track your spending for one month and see how close you are.

👉 Ready to check if you’re on track? Use the Grade My Finance calculator to see how your budget scores.

👉 Related: Why an Emergency Fund is Your Financial Safety Net