50/30/20 Budget Calculator
Apply the popular 50/30/20 budgeting rule to your income. Split your after-tax earnings into needs, wants, and savings to create a balanced budget that builds wealth while enjoying life.
Calculate Your 50/30/20 Split
Your Budget Breakdown
Monthly Income (After Tax)
$5,000
50% — Needs
$2,500
Housing, utilities, groceries, insurance, transportation
30% — Wants
$1,500
Entertainment, dining out, hobbies, subscriptions
20% — Savings
$1,000
Emergency fund, retirement, investments, debt payoff
Annual Needs
$30,000
Annual Wants
$18,000
Annual Savings
$12,000
The 50/30/20 Budget Rule
What Is It?
The 50/30/20 rule is a simple budgeting framework popularized by Senator Elizabeth Warren in her book "All Your Worth." It divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment.
This straightforward approach eliminates the complexity of tracking dozens of spending categories. By focusing on just three buckets, it's easier to maintain and more likely to succeed long-term.
Why It Works
- Simplicity: Only three categories to track
- Balance: Covers essentials while allowing enjoyment
- Flexibility: Works across income levels
- Sustainable: Not overly restrictive
- Goal-Oriented: Prioritizes wealth building
Understanding the Categories
Needs
Essential expenses you can't live without:
- • Housing (rent/mortgage)
- • Utilities (electric, water, gas)
- • Groceries (not dining out)
- • Health insurance
- • Car payment & insurance
- • Minimum debt payments
- • Childcare
Ask: "Would I lose my home, job, or health without this?"
Wants
Nice-to-haves that improve quality of life:
- • Dining out & takeout
- • Entertainment & hobbies
- • Streaming subscriptions
- • Vacations & travel
- • Shopping (clothes, gadgets)
- • Gym memberships
- • Upgraded services
Ask: "Could I survive without this, even if uncomfortable?"
Savings
Building wealth and financial security:
- • Emergency fund
- • Retirement (401k, IRA)
- • Extra debt payments
- • Investment accounts
- • House down payment
- • College savings
- • Sinking funds
Treat savings like a bill that must be paid first.
Sample Budgets at Different Incomes
| Monthly Income | Needs (50%) | Wants (30%) | Savings (20%) |
|---|---|---|---|
| $3,000 | $1,500 | $900 | $600 |
| $4,500 | $2,250 | $1,350 | $900 |
| $6,000 | $3,000 | $1,800 | $1,200 |
| $8,000 | $4,000 | $2,400 | $1,600 |
| $10,000 | $5,000 | $3,000 | $2,000 |
When to Adjust the Ratios
High Cost-of-Living Areas
In expensive cities, needs may require 60-70% of income. Consider:
- • 60% Needs / 20% Wants / 20% Savings
- • Or: 55% Needs / 25% Wants / 20% Savings
Prioritize the 20% savings if possible — adjust wants first.
Aggressive Debt Payoff
When tackling high-interest debt:
- • 50% Needs / 20% Wants / 30% Savings+Debt
- • Or: 50% Needs / 10% Wants / 40% Savings+Debt
Once debt-free, shift extra debt payments to investments.
Low Income Situations
When needs exceed 50%:
- • Focus on covering needs first
- • Save something, even if only 5-10%
- • Minimize wants until income increases
Building any savings habit matters more than hitting exact percentages.
High Earners (FIRE Goals)
For early retirement or financial independence:
- • 30% Needs / 20% Wants / 50% Savings
- • Or: 25% Needs / 25% Wants / 50% Savings
Lifestyle creep is the enemy — keep needs low as income grows.
Common Mistakes to Avoid
Confusing Needs and Wants
Rent is a need; a luxury apartment is a want. A car may be a need; a brand-new luxury car is a want. Basic phone service is a need; the latest iPhone is a want. Be honest about what's truly essential.
Using Gross Income
Always use after-tax income (your actual take-home pay). If you use gross income, you'll overestimate your available budget by 20-30% and end up in debt.
Ignoring Irregular Expenses
Annual costs like insurance, car registration, and holiday gifts should be divided by 12 and included in your monthly needs. Otherwise, they'll wreck your budget when due.
Frequently Asked Questions
What if my needs exceed 50%?
First, scrutinize your needs — some may actually be wants in disguise. If truly necessary, cut wants before savings. Consider ways to reduce needs: cheaper housing, refinancing, or switching insurance. The goal is progress, not perfection.
Should I include debt payments in needs or savings?
Minimum payments are needs — you must pay them. Extra payments toward principal go in the savings category. This encourages aggressive debt payoff as part of your wealth-building strategy.
Is 20% savings enough for retirement?
For most people, 20% is a solid target that allows retirement by traditional age. If starting late (40+), you may need 25-30%. If aiming for early retirement, 40-50%+ is common in the FIRE community.
Budget Disclaimer
The 50/30/20 rule is a guideline, not a strict requirement. Your optimal budget depends on your location, family size, debt situation, and goals. This calculator provides general estimates only. Consider consulting a financial advisor for personalized budgeting advice tailored to your specific circumstances.