So far in this series, we’ve answered important questions about budgeting, such as “What is a budget?” and “Why is budgeting beneficial?” This series has been focusing on how using a budget can help you keep your spending in check and ensure your savings goals are on track.

One way to do that is using Mint’s free 50/30/20 calculator to budget.

The 50/30/20 rule (also referred to as the 50/20/30 rule) is one method of budgeting that can help you keep your spending in alignment with your savings goals. Budgets should be about more than just paying your bills on time—the right budget can help you determine how much you should be spending, and on what.

The 50/30/20 rule can serve as a great tool to help you diversify your financial profile, reach dynamic savings goals, and foster overall financial health.

In this post, we’re taking you through the steps of budgeting using the 50/30/20 approach so that you can learn how to set up a budget that’s sustainable, effective, and simple. Use the links below to navigate or read all the way through to absorb all of our tips on how to budget using the 50/30/20 method:

In the previous chapters, we discussed what to include in a budget and the various ways you can create your own budget, like with a budget template. If you haven’t read through them already, we highly recommend going through them to get a comprehensive overview of budgeting.

What is the 50/30/20 Budgeting Rule?

The 50/30/20 budgeting rule–also referred to as the 50/20/30 budgeting rule–divides after-tax income into three different buckets:

Essentials (50%)
Wants (30%)
Savings (20%)

Essentials: 50% of your income

To begin abiding by this rule, set aside no more than half of your income for the absolute necessities in your life. This might seem like a high percentage (and, at 50%, it is), but once you consider everything that falls into this category it begins to make a bit more sense.

This will include your living expenses each month, which are essential expenses that you would almost certainly have to pay, regardless of where you lived, where you worked, or what your future plans happen to include. In general, these expenses are nearly the same for everyone and include:

Transportation costs
Utility bills

The percentage lets you adjust, while still maintaining a sound, balanced budget. And remember, it’s more about the total sum than individual costs. For instance, some people live in high-rent areas, yet can walk to work, while others enjoy much lower housing costs, but transportation is far more expensive.

How much your essential expenses cost will differ for each person depending on where they live and what their lifestyle is. If you’re thinking of relocating to a different part of the country, it’s a good idea to calculate your cost of living beforehand so you can know if you can realistically afford to live in that area based on your current total income.

Wants: 30% of your income

The second category, and the one that can make the most difference in your budget, is unnecessary expenses that enhance your lifestyle. Some financial experts consider this category completely discretionary, but in modern society, many of these so-called luxuries have taken on more of a mandatory status. It all depends on what you want out of life and what you’re willing to sacrifice.

These personal lifestyle expenses include items such as:

Your cell phone plan
Cable bill
Trips to the coffee shop
Savings for travel
Gym memberships
Weekend trips
Dining out

If you travel extensively or work on-the-go, your cell phone plan is probably more of a necessity than a luxury. However, you have some wiggle room since you can decide upon the tier of the service you’re paying for.

Only you can decide which of your expenses can be designated as “personal,” and which ones are truly obligatory. Similar to how no more than 50 percent of your income should go toward essential expenses, 30 percent is the maximum amount you should spend on personal choices. The fewer costs you have in this category, the more progress you’ll make paying down debt and securing your future.

Savings: 20% of your income

The next step is to dedicate 20% of your take-home pay toward savings. This is essentially how much you should set aside from your paycheck each month for savings. This can include different types of savings like:

Savings plans
Retirement accounts
Debt payments
Rainy-day funds

These are all things you should add to, but which wouldn’t endanger your life or leave you homeless if you didn’t. That’s a bit of an oversimplification, but hopefully you get the gist. This category of expenses should only be paid after your essentials are already taken care of and before you even think about anything in the last category of personal spending.

Think of this as your “get ahead” category where you can challenge yourself to save. Whereas 50%(or less) of your income is the goal for essentials, 20%—or more—should be your goal as far as obligations are concerned. You’ll pay off debt quicker and make more significant strides toward a frustration-free future by devoting as much of your income as you can to this category.

The term “retirement” might not carry a sense of urgency when you’re only 24 years old, but it certainly will become more pressing in decades to come. Just keep in mind the advantage of starting early is you will earn compounding interest the longer you let this fund grow.

You don’t want to cash out your 401k to be able to pay off debt. The more you put towards savings now, the quicker you can pay off your debt and achieve financial stability.

Use our compound interest calculator to see how your money can grow over time.

Establishing good habits will last a lifetime. You don’t need a higher paying job to follow the tenets of the 50/30/20 rule; anyone can do it. Since this is a percentage-based system, the same proportions apply whether you’re earning an entry-level salary and living in a studio apartment, or if you’re years into your career and about to buy your first home.

A note of caution, though: Try not to take this rule too literally. The proportions are sound, but your life is unlike anyone else’s. What this plan does is provide a framework for you to work within. Once you review your income and expenses and determine what’s essential and what’s not, only then you can create a budget that helps you make the most of your money. Years from now, you can still fall back on the same guidelines to help your budget evolve as your life does.

Give our 50/30/20 budgeting calculator a try to see how this budgeting method works:

50/30/20 Budget Calculator

Here’s how much you have for:

Ask Yourself: Why is a 50/30/20 Budget Necessary?

According to, there are plenty of different reasons why people start a budget:

To save up for a large expense such as a house, car, or vacation
Put a security deposit on an apartment
To reduce spending habits
To improve their credit score
To eliminate debt
To break the paycheck to paycheck cycle

Identifying the reason why you’re budgeting with the 50/30/20 method can help you stay motivated and create a better plan to reach your goal. It’s kind of like the “eye on the prize” mentality. If you’re tempted to splurge, you can use your overarching goal to bring you back to your saving senses. So ask yourself: why am I starting to budget? What do I want to achieve?

Additionally, if you’re saving up for something specific, try to determine an exact number so that you can regularly evaluate whether or not your budget is on track throughout the week, month, or year.

How to Budget with the 50/30/20 Rule

To make the most of this budgeting method, consider following the steps below:

Deep Dive Into Your Current Spending Habits

Before implementing a 50/30/20 budget, take a long, hard look in the mirror (or maybe your wallet, rather). We’re talking about analyzing your spending habits. Think about whether you tend to overspend on:


Figuring out your spending vices from the very beginning will help you learn how to use a 50/30/20 budget that effectively cuts spending where you need it most.

Take a look at your bank and credit card statements over the last few months and see if you can find any common trends. If you find that you’re overspending on going out for food and drinks, come up with a plan for how you can avoid this scenario.

There are plenty of ways to budget and save money without compromising your social life, such as:

Cook dinner at home before you go out
Have a potluck with friends
Find happy hour specials around town.

You can also try budgeting for groceries to make sure your eyes aren’t bigger than your stomach and you don’t overspend every time you step foot into the grocery store. The 50/30/20 budget rule is a good way to figure out exactly how much you have to spend on certain expenses.

Pro Tip: Using Mint’s easy budget categorization, you can identify where you can cut back on unnecessary expenses.

Identify Irregular Large Ticket Expenses in the “Wants” Category

Of course, there are expenses in life that we simply can’t avoid. Maybe you need to make a repair on your vehicle, or perhaps you’re putting a down payment on a house in the next six months. Oftentimes these bills are necessary expenses, so you’ll have to factor them into your budget.

When you’re coming up with your 50/30/20 budget, take a moment to look at your calendar so that you can plan for these expenses and adjust your spending in the time before and after you incur the expense.

Add Up All Income

Totaling your income is an important first step when learning how to budget your money using the 50/30/20 rule, but it’s not always as simple as it sounds. Depending on your job, you might have a relatively steady paycheck or one that fluctuates from month to month. If the latter is the case, collect your paychecks from the last six months and find the average income between them.

The last thing you want to happen is to end up in a budget deficit, which is when your spending is greater than your income. If you’re finding that you’re not able to meet that 20% for savings each month, that might mean it’s time to make some changes.

There are various ways you can increase your savings each month, such as:

Consider a minimalist lifestyle to cut back on some of your expenses
Increase your income with an additional stream of income
Negotiate your salary with your current employer

If you want an additional stream of income, but don’t want to leave the house to do so, you should look into how you can make money at home.

What Are the Benefits of the 50/30/20 Rule?

There are many benefits of using the 50/30/20 rule to budget:

It can help you get on top of your finances: The 50/30/20 rule is a simple way to get on top of your finances so you make sure you’re not spending beyond your means.
It can help you make a financial plan: Everyone’s financial plan looks different, but using the 50/30/20 rule is a great way to outline your finances so that you can figure out exactly what you need to do to achieve your goals. For example, if your goal is to invest more, the 50/30/20 rule will help you figure out exactly how much you need to put towards investments.
It’s easier to use than some other budgeting tools: There are a myriad of different budgeting tools and methods out there. Some people use financial calculators to calculate their budget, some people use a journal to write down all their expenses. But the 50/30/20 budget rule is often much easier to use than most other budgeting tools. It clearly outlines your expenses and savings so you can figure out if you’re staying on track with your finances.

Is the 50/30/20 Budget Right for You?

The 50/30/20 budget isn’t the only option. Other popular methods include:

Zero-sum: The principle of the zero-sum budget is that you must allocate each and every dollar you earn toward a specific expense, savings account, debt, or disposable income account. This style can help deter unnecessary spending because you’ll know exactly how much you have to spend on what items.

Envelope budgeting: Swiping your card left and right is easy—but the envelope method doesn’t let you succumb to this temptation. Rather than using your card to spend, you use a predetermined amount of cash as your spending pool, nothing more.

Choosing a budgeting style that works for you depends on a variety of factors; there’s no one-size-fits-all approach to budgeting and saving money. That said, the 50/30/20 tends to be a simple yet effective option for getting started on your budgeting journey.

Main Takeaways: How to Budget Using the 50/30/20 Rule

Here are the key tenets of the 50/30/20 rule of budgeting:

This budget rule is a simple method that can help you reach your financial goals.
This budgeting method stipulates that you spend no more than 50% of your after-tax income on needs.
The remaining after-tax income should be split up between 30% wants or “lifestyle” purchases, and 20% to savings or debt repayment.
This style of budgeting is a good way to save up for larger expenses, reduce your spending habits, and break the paycheck-to-paycheck cycle.
The 50/30/20 budget rule is a much more straightforward budgeting method than some of the other common strategies.

Try the 50/30/20 Budgeting Rule & Take Control of Your Finances

Mint offers budgeting software and a helpful budgeting calculator that makes it easy to live in accordance with the 50/30/20 rule (or any budget that suits your lifestyle) so that you can live life to its fullest. After spending just a little bit of time determining which of your expenses fall into which category, you can create your very first budget and keep track of it every day. And when your situation undoubtedly changes, Mint lets you adjust, so your budget can change with you.

Sign up for your free account today, build your 50/30/20 budget, and make this the year you build a strong foundation for your future.

Now that you know what the 50/30/20 budget rule is and how you can use Mint to make a budget, you can move onto the next chapter in the series, which covers zero-based budgeting. Continue reading our series to learn more about how budgeting can help you reach your goals and achieve financial stability.

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