The 50-30-20 Budget: How It Works + A 50-30-20 Budget Template

50-30-20 Budget

Like many, you might shudder at the word budget. Perhaps it sounds too boring or challenging to figure out. But the 50-30-20 budget and the 50-30-20 budget template prove it doesn’t have to be difficult.

A budget plans out exactly how you’ll use your money and this can be tailored to suit your specific lifestyle and situation.

If you’re looking to simplify your budgeting process or are new to budgeting, then this might be the perfect match. It involves 3 easy steps that will help you prioritize your monthly financial commitments.

The 50-30-20 rule is comprehensive and covers all bases. And don’t worry if math isn’t your thing because we’ve included 50 30 20 budget spreadsheet ideas to help you stay on top of your budgeting strategies.

That said, let’s take a close look at this budgeting rule, including what it is and also how it works. We’ll also include calculators so you can jump right in and get started immediately.

What is a 50-30-20 budget?

In its simplest form, the 50-30-20 budget rule divides your after-tax income into three distinct buckets, which are:

This plan keeps your finances simple and also easy to follow.

Who invented the 50-30-20 budget?

U.S. Senator, Elizabeth Warren, came up with the 50-30-20 budget. In a book called All Your Worth: The Ultimate Lifetime Money Plan, Elizabeth Warren, and Amelia Warren Tyagi described this simple way to budget.

And not surprisingly, it has stuck. People love how easy it is to understand and follow!

Why this rule works

You might be wondering why this budget works and how it will impact your life and finances. There are a few reasons.


Firstly, the budget is really simple. So if you’re not into details or if you’re just starting out, this budget is fail-safe and easy to implement.

You only focus on 3 buckets – needs, wants, and also savings which are pretty easy to figure out.

Every dollar has a purpose

Secondly, it helps you account for every dollar.

You start off with your after-tax income, which represents 100% of what you have to work with, and then you work out the different spending groups from there.

Financial goals

Lastly, it can help you stay focused on your financial goals and save up for large expenses such as a house or car.

Alternatively, it can also help you pay down debt faster if that’s one of your initial goals.

Percentages for your budget

The 50-30-20 budget is divided into 3 parts. 50% for needs, 30% for wants, and also 20% for savings. And remember you can always use a 50-30-20 calculator or even a 50-30-20 budget template to create yours.

Category 1: 50% needs

The 50% needs category is for all your monthly essentials. This includes things you simply cannot live without.

For instance rent or mortgage payments, healthcare, groceries, car payments, utilities, and also debt payments.

So as you can see, the needs budgeting category only includes the necessities you need to survive. This would not include entertainment, take-out, or fine dining in this category.

How to save to stay within the 50% rule

You should be able to comfortably meet your needs with 50% of your monthly income after tax. If you’re spending more than this, you may want to re-evaluate.

Are you paying too much for rent? Are you spending more on transport than you can afford?

Do you spend a large chunk of money on weekday lunches? These are all good questions to ask yourself.

Whatever the case, you can make immediate changes to your spending and also improve your budget.

For instance, consider moving to a more affordable home or using public transport to keep costs down. Additionally, you can make lunch at home and bring it to the office.

Category 2: 30% wants

Wants are all the “nice to haves” that you spend money on with the 50-30-20 budget. These are items you definitely don’t need, but perhaps they are fun or they add to your life in a positive way. And that’s ok!

The aim is to keep a detailed budgeting plan, so your spending habits don’t get out of control!

The list of wants is endless and also differs from person to person depending on your lifestyle.

For example, your personal list might include going out to the movies, eating in restaurants, buying new electronic gadgets, new handbags, or tickets to a big game.

Another person’s wants might include cable TV or a Netflix subscription, going to concerts, and paying for gym memberships.

Consider alternatives to large expenses

Remember: there are many good substitutes for wants that cost little to nothing. For example, you might want to buy the latest iPhone but can’t afford it.

Instead, buy an earlier version, and you’ll still get the same benefits. Alternatively, fitness fanatics who can’t justify the cost of signing up for the gym could work out at home instead.

There is almost always a cheaper alternative available when you’re looking to purchase an item. But feel free to balance your wants vs. needs, so you still enjoy some of these activities from time to time.

Wants may sometimes include premium experiences that are beyond reach financially. For example, someone may want a new BMW when they can easily have a nicely equipped Toyota that would cost much less.

Be mindful of your wants, as it can be easy to justify spending if you really want something. The wants category is often the trickiest to master.

Category 3: 20% savings

Arguably the most important category in the 50-30-20 budget is the savings category as this can determine your future. Savings in this case refers to both savings and investments.

Savings can take many forms ranging from your emergency fund to your savings account. It can also include any money market investments you have.

Keep in mind that, investments refer to any money you have set aside to generate income. It can include investing in the stock market, purchasing real estate, or also setting up your retirement accounts.

Priorities for saving

Your top priority in this category should be your emergency fund. It is important to have 3 to 6 months’ worth of living expenses saved in your emergency fund.

Beyond that, focus on your retirement savings. These can include putting money into your company-sponsored 401(K) plan or also an IRA. You might look into working with an advisor to set this up.

How to use the 50-30-20 rule to create your budget

The 50-30-20 budget rule is very simple and it only has a couple of steps to get started.

Know what your income is

To get started, you need to figure out your after-tax income.

This number is simply the amount of money you have left over after taxes are paid. These taxes include federal, state, Medicare, and also social security.

Note: don’t be confused by your gross income, which is the salary you earn before tax deductions have come out. We’re looking purely at how much money you have left in your bank account to divide it into your three main categories.

If you want a quick and easy way to figure out your take-home pay, simply look at your paycheck stubs.

If you run your own business, you’ll still calculate your after-tax income. All you have to do is take your gross income and subtract your business expenses and also any state and federal taxes.

Split your income into the three categories

Once you’ve figured out your after-tax income, the fun begins. It’s time to split your income into the 3 spending groups.

You can do this by creating your own budget, using a calculator, or by using the 50-30-20 budget template.

And then you’re all set! All you have to do is keep track of your money and also make sure you stick to the budget.

A quick note on paying down debt

Do you have credit card debt, a personal loan balance, or perhaps student loans to pay back? Debt payments fall across both your needs and your savings categories with the 50-30-20 rule.

Why? The minimum payment you owe on your outstanding debt is a need in that you must pay it back and also pay it on time each month.

But only paying back the minimum amount is a slow and expensive way to tackle your debt. Instead, we recommend contributing to your savings category, so you save money to pay off your debt faster.

This way, the saved money will go towards the principal, effectively saving you money in paying future interest payments down the road.

50-30-20 calculators

Figuring out your budget doesn’t have to be difficult. In fact, it can be as easy as using a simple calculator.

Here are some examples of a 50-30-20 calculator.

Banzai calculator

The Banzai calculator will ask you to enter your post-tax income, and it does the rest for you!

You’ll easily see how much to allocate to each of the 3 categories for the 50-30-20 budget.

Mint calculator

The Intuit Mintlife calculator is similar.

Simply enter your monthly after-tax income, and the 50-30-20 calculator will immediately display how much you have for needs (labeled essentials), wants, and also savings.

DIY 50 30 20 budget spreadsheet

Another option is to set up your own 50-30-20 budget spreadsheet.

If you’re great with Excel or Google Sheets, you’ll enter your post-tax income into a single cell and set up calculations to convert this into corresponding 50%, 30%, and 20% categories.

A 50-30-20 budget template you can use

If you haven’t already set up your budget, this 50-30-20 budget template is easy to use. Simply add your own budgeting amounts to the template.

Below is an example with possible amounts included.

Total net income per month: $5000

Needs 50%: $2,500
Mortgage $1000
Healthcare $200
Insurance $200
Utilities $200
Groceries $300
Transportation $200
Debt payoff $300
Phone Bill $100
Needs total $2500    
Wants 30%: $1500
Entertainment $300
Restaurants $300
Gym $150
Shopping $350
Subscriptions and TV streaming services $100
Miscellaneous spending $300
Wants total $1500
Savings 20%: $1000
Emergency fund $300
Retirement savings $500
Sinking fund $200
Savings total $1000
Total budgeted $5000

As you can see, you can add whatever amounts you want to this 50-30-20 budget template and then use the percentages listed to create your own version of this budget.

You can also add different categories if needed, but this works well as an example.

Additionally, here is an actual budget worksheet to download. You can lay it out based on the 50-30-20 split discussed. Just click the image below!

Clever Girl Finance budget worksheet
Click the image to download the budget template

Leverage the 50-30-20 budget today!

Budgeting doesn’t have to be difficult, and this option is a great way to achieve your budget goals quickly and easily, especially if you use the 50-30-20 budget template or even a 50-30-20 calculator.

Remember to use your post-tax income as your base and make further calculations from there. Now that you have all the steps in place, go ahead and get started!

P.S. Here are other budgeting methods to explore. The 80-20 budget, the 60-20-20 budget, the 70-20-10 budget, and also the 30-30-30-10 budget!

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