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The 50/30/20 Budget Rule Explained

15 Jun 2024
5 min read

A simple budgeting framework that allocates 50% to needs, 30% to wants, and 20% to savings. Here's how to apply it to your family budget.


What is the 50/30/20 Rule?

The 50/30/20 rule is a simple budgeting framework popularized by Senator Elizabeth Warren. It divides your after-tax income into three categories:

  • 50% for Needs - Essential expenses you must pay

  • 30% for Wants - Non-essential spending for enjoyment

  • 20% for Savings - Building wealth and paying off debt

    • Breaking Down the Categories

    Needs (50%)


  • Rent or mortgage payments

  • Utilities (electricity, gas, water)

  • Groceries

  • Insurance (health, car, home)

  • Minimum debt repayments

  • Transport to work

  • Childcare

    • Wants (30%)


  • Dining out and takeaway

  • Entertainment subscriptions (Netflix, Spotify)

  • Gym membership

  • Hobbies

  • Holidays

  • Shopping for non-essentials

    • Savings (20%)


  • Emergency fund

  • Extra debt repayments

  • Retirement savings

  • Investment contributions

  • Saving for goals (house deposit, car)

    • Example: $80,000 Net Income

    With a take-home pay of $80,000/year ($1,538/week):

    Category | Annual | Weekly
    |----------|--------|--------|
    Needs (50%) | $40,000 | $769
    Wants (30%) | $24,000 | $461
    Savings (20%) | $16,000 | $308

    Is 50/30/20 Right for You?

    The 50/30/20 rule works well for many people, but you may need to adjust based on:

  • High cost of living areas - You might need 60% for needs

  • Debt repayment goals - Consider 50/20/30 to pay off debt faster

  • Saving for a house - Increase savings to 30% or more