Split your after-tax income into needs, wants, and savings with the 50/30/20 rule.
Take-home pay for the month after taxes and deductions. Example: $5,000.
Needs (50%)
$2,500.00 per month
Housing, groceries, utilities, insurance, minimum debt payments — the essentials.
Wants (30%)
$1,500.00 per month
Discretionary spending: dining out, hobbies, subscriptions, upgrades.
Savings & Debt (20%)
$1,000.00 per month
Emergency fund, investments, and extra debt repayment above minimums.
What this means
Turns one income number into three actionable spending ceilings that sum back to 100%.
The 50/30/20 rule is a simple budgeting framework: spend 50% of after-tax income on needs, 30% on wants, and put the remaining 20% toward savings and debt repayment.
Formula
needs = income × 0.50 | wants = income × 0.30 | savings = income × 0.20
Worked examples
FAQ
What counts as a need vs. a want?
Needs are required for basic living (housing, food, transport, minimum payments). Wants are optional (dining out, subscriptions, entertainment).
Does the 20% include debt payments?
Minimum debt payments belong to needs; any extra above the minimum counts as part of the 20% savings and debt bucket.
Compare actual spending to each bucket. Shift wants to needs or savings if a bucket consistently overflows.