What is the 50/30/20 rule?

The 50/30/20 rule is a popular budgeting method that splits your monthly income among three main categories.

50% of your income: needs

Necessities are the expenses you can’t avoid. This portion of your budget should cover required costs such as: Housing, Food, Transportation, Basic utilities, Insurance, loan payments, Child care or other expenses.

30% of your income: wants

Wants are the extras that aren’t essential to living and working, such as Monthly subscriptions. Travel, Entertainment, Meals out.

20% of your income: savings and debt

Starting and growing an emergency fund. Saving for retirement through a 401(k) and perhaps an individual retirement account. Paying off debt, beginning with high-interest accounts such as credit cards.