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What is the 50/30/20 rule?

The 50/30/20 rule is a simple way to plan your budget. It suggests using 50% of your take-home pay for needs, 30% for wants, and 20% for savings and paying off debt.

Typical needs include housing, transportation, insurance, childcare, utilities and groceries.

Everyone’s “wants” are different, but dining out, concerts, streaming services and kids’ sports and activities likely fall into this category. The savings and debt paydown category includes retirement savings in a 401(k) or similar account, 529 educational savings and investments alongside credit card, student loan and other debt payments.

Think of this budget as a helpful guide, not something you have to follow perfectly. It can help you cover the basics, enjoy some fun spending, and still put money aside for saving and future goals.

Here’s how each category works and what might fit into each one:

The percentages in the 50/30/20 budget can be changed to fit your financial needs at a given moment. If saving or paying down debt is a priority, for example, it’s OK to shrink your wants bucket and increase the savings and debt bucket.

Now that you know how much of your income to put toward necessities, wants and savings and debt repayment, it’s time to stack that up against your actual spending.

✅ Step 1: Look at your last one to three months of spending

Pull out your bank and credit card statements and add up your spending. Total up your needs, wants and savings/debt repayment numbers. How do they compare with the 50/30/20 categories? For example, do your “wants” exceed 30%?

If so, highlight a few expenses you want to adjust first. Dining out, food delivery and subscriptions are good places to start. Finding ways to save on groceries by swapping for store brands or shopping at discount grocers like Aldi or Grocery Outlet could also offer valuable savings in the 50% “needs” category.

✅ Step 2: Make one small change this week

It’s time to take action. Pause or cancel that subscription you’re not using. Make a grocery list and stick to it. Move $25 into your savings account. Focusing on one quick win can build momentum, especially as you start to see savings stack up.

✅ Step 3: Automate as much as you can

Setting up automatic payments for credit cards, debt and savings and investments can takes some of the stress out of money management. Automating payments adds consistency to your money routine and can help you stay on track.

Choose realistic amounts for savings. Set aside a specific amount for your emergency fund. Consider how much you want to save for other things, such as vacations, holiday gifts and other big purchases. Then evaluate how much you can put toward other goals like a wedding, home or car purchase. If you have debt, schedule automatic payments above the minimums, if possible, to chip away at your debt.

Alternative budgeting methods

While the 50/30/20 method can be a good place to start, it might not always fit your needs or circumstances. Here are some alternatives:

If you live in a high cost of living area, or have high childcare costs, the 60/30/10 budget might work better during this season of life.

If you want to curb impulse purchases and feel more emotionally connected to your money, the envelope system might be a good way to start.

Zero-based budgeting is another method, geared toward people who want to assign a “job” to every dollar they have coming in until they have zero dollars left at the end of the month.

If your goal is to prioritize savings, reverse budgeting might be for you. In this method, you put money toward savings and retirement first, before paying fixed and variable expenses like rent and groceries. This method requires careful planning, so you don’t overdraft or come up short for your other bills.

Dive deeper with your monthly budget

For more budgeting advice, including how to prioritize your savings and debt repayment, review our tips for how to budget.

Not sure how to start budgeting? A pen and paper is a free and low stakes way to list your expenses. If you want something more automated, download a budget app.

About the authors

Amanda Barroso, Ph.D., is a writer and content strategist helping consumers navigate budgeting, credit building and credit scoring. Before joining NerdWallet, Amanda wrote about demographic trends at the Pew Research Center and earned a Ph.D. from The Ohio State University.

Her work has been featured by the Associated Press, Washington Post and Yahoo Finance.

Elizabeth Ayoola is a Lead Multimedia Producer and Co-Host of the “Smart Money” podcast. Before delving into the podcast world, Elizabeth acquired over ten years of experience as a writer, and seven were spent covering personal finance topics. Her journey to finance writing started with a goal to learn as much as she could about how to attain financial freedom and share information with others about how to do it, too. This led her to Debt.com, where she covered topics relating to mortgages, debt and credit. Her articles have appeared on platforms like Washington Post, The Associated Press, The Washington Post, Yahoo, Essence, The Knot, PopSugar and Parents.com. Elizabeth has also done extensive spokesperson work and appeared on multiple renowned national networks like Good Morning America, ABC, NBC, and Fox to discuss money.

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