We advocate the 50/30/20 budget as the best way to spend your money responsibly.

Use our calculator to estimate how you should divide your monthly income into needs, wants, and savings.

50/30/20 Budget Calculator

Our 50/30/20 calculator divides your net income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

Find out how this budget approach applies to your money.

Savings and debt repayment

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What is the 50/30/20 rule?

The 50/30/20 rule is a popular budgeting method that splits your monthly income between three main categories. Here’s how it breaks down:

Monthly income after tax. This figure is your income after tax deduction and the cost of payroll deductions for health insurance, 401 (k) contributions or other automatic savings have been added back.

50% of your income: needs. Necessities are the expenses that you cannot avoid. This part of your budget should cover costs such as:

  • Minimum loan payments. Anything above the minimum goes into the savings and debt repayment compartment.

  • Child care or other expenses that must be covered for you to be able to work.

30% of your income: desires. Distinguish between needs and desires is not always easy and may vary from budget to budget. In general, however, desires are the extras that are not essential for living and working. They are often for fun and can include:

20% of your income: savings and debt. Savings are the amount you save to prepare for the future. Devote this portion of your income to paying off existing debt and creating a comfortable financial cushion to avoid incurring future debt.

How exactly to use this part of your budget depends on your situation, but it will likely include:

  • Creation and development of an emergency fund.

  • Save for retirement with a 401 (k) account and maybe an individual retirement account.

  • Pay off the debt, starting with the toxic high interest type.

The 50/30/20 budget rule divides net income as follows: 50% for necessities, 30% for needs, and 20% for savings and debt repayment.

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