top of page
  • Alex Mizerski

What is the 50/30/20 rule and who wrote the book on it?

Updated: Feb 10, 2021

That title can be very confusing! I'm here to answer what is the 50/30/20 rule and tell you why it one of the easier budgeting methodologies to follow.

What is the 50/30/20 rule?

The 50/30/20 rule is a simple form of budgeting where 50% of your income is allocated toward needs, 30% toward wants, and 20% toward savings. It is really that simple!

This methodology was championed by Senator Elizabeth Warren in her book, All Your Worth: The Ultimate Lifetime Money Plan (a good read that I suggest anyone check out). One of the best parts of this rule is the 20% savings. That is a solid savings rate for anyone looking to ensure they have plenty in the bank during retirement. At that savings rate, many of us should not have any issues retiring at 65 and living comfortably for 30 years.

What are wants vs needs vs savings?

Determining how to categorize your spending so it fits within this model can be tricky for some expenditures. To help with that I've outlined some of the most common Wants vs. Needs vs. Savings items.

Needs: When I think of needs I focus on Maslow's hierarchy and the basic needs section (partly because I studied psychology and partly because he does a good job of identifying actual needs)

  • Rent/Mortgage - you need a roof over your head

  • Food - you gotta eat

  • Car/Transport - getting around to your job or ballet are a critical part of earning a living

  • Utilities - in reality you could wrap this into rent/mortgage as it is 100% a part of running a household

  • Insurance - typically health insurance, everyone should have it and everyone really needs it to ensure they stay healthy enough to earn a living

  • Child care - if you have children and have a job, someone is going to have to take care of them while you work and you most likely are going to have to pay that person

Wants: basically anything that isn't savings and isn't a basic need fall in here

  • The movies

  • Travel - non work related travel

  • Netflix/Prime/Hulu/Disney +/etc.

  • Meals not cooked at home

  • General entertainment

  • Clothing - both a want and a need, but anything not purchased at Costco/Walmart/Target could be considered a Want here

Savings: this includes anything that you don't plan to spend for a while

  • 401k

  • 529 - college savings plan

  • Roth

  • Stocks

  • Bonds

  • CDs

  • Savings account

50/30/20 Example

I don't know about the rest of my readers, but I personally understand concepts best when I have a real-world example so I'm going to write one out here that I'm hoping most of you can follow along with. As always, if you have questions about anything within the article please leave a comment, find us on Facebook and message us there, or send an email to

For our example, I'll use median household income published by the Census Bureau. They state the median household income in America is $68,703. When you take out taxes (6.2% for social security and 1.45% for Medicare) and insurance, the typical gross pay comes out to about 90% of net pay. I'm excluding any 401k contributions because those will be accounted for in the 20% savings section.

$68,703 ÷ 24 paychecks a year = $2,862.63

$2,862.62 * .90 = $2,576.36 gross pay (the amount of your paycheck) per pay period

$2,576.36 * 2 = $5,152.73 take home pay every month

$5,152.73 * 50% = $2,576.36 should go toward your Needs

$5,152.73 * 30% = $1,545.82 should go toward your Wants

$5,152.73 * 20% = $1,030.55 should go toward your Savings

50/30/20 Calculator

I've included a downloadable calculator below if you want to try out the 50/30/20 method with your own income.

There are two sheets in this document, one for a single individual, and another for a dual income household. There are a variety of needs, wants, and savings items listed where you can really break down your budget and get a great sense of where your money should be going.

In addition, there is a calculation for any unaccounted for funds that you can do what you want with.

50 30 20 Budget Template
Download XLSX • 106KB


Budgeting can be such a valuable tool and finding the right approach for you makes all the difference. This is just one approach that doesn't take a long time to test out.

If you are looking for your own approach to budgeting I suggest you download the template, insert your numbers and test it out for a few months. If it helps you zero in on a budget that works for you, great! If not, then you only lost a little bit of time and can redirect your attention to some other budgeting method that fits YOU!

Good luck!

Related Articles:

33 views0 comments

Recent Posts

See All
Post: Blog2 Post
bottom of page