The formula
- 50% Needs: housing, utilities, groceries, transport, minimum debt, insurance.
- 30% Wants: dining out, entertainment, subscriptions, travel.
- 20% Saving/Debt: emergency fund, investing, extra debt payments.
Setup in 10 minutes
- Find your after‑tax monthly income.
- Multiply by 0.50, 0.30, 0.20 for target caps.
- Map each expense to Needs vs. Wants.
- Automate the 20% on payday.
Adapting the rule
- High housing costs: Nudge to 60/20/20 temporarily.
- Debt payoff sprint: Try 50/20/30 (swap Wants/Saving percentages).
- Low income: Keep Wants at 10–15% and push more to Needs until income grows.
Common misclassifications
- Groceries = Need; takeout = Want.
- Phone: base plan = Need; add‑ons = Want.
Examples
$4,000 net/month →
- Needs $2,000 (50%)
- Wants $1,200 (30%)
- Saving/Debt $800 (20%)
Frequently Asked Questions
Is 50/30/20 realistic?
Yes—treat it as a guide, not a law.
Can I invest inside the 20%?
Absolutely. Prioritize emergency fund first.
What about childcare?
It's a Need; adjust other categories accordingly.