Have you tried to keep a personal budget before? Many folks have tried, but not everyone has succeeded. You need a budgeting method that is easy and works for you.
Fortunately, you have a variety of options when it comes to budgeting. The most popular among these is the 50/30/20 budget. This method requires you to divide your monthly income into several broad, yet focused spending categories.
- 50% for Regular Needs
- 30% for Wants
- 20% for Savings & Debt
Note on “Income”
Before we go too far, let’s pause to consider what “income” means in this budget system. Your “income” here is your remaining income after taxes.
This is important to note because your taxes are also part of your budget, in a sense. For most folks, though, your income tax is automatically deducted.
However, self-employed folks need to setup a separate account just for taxes when budgeting. Paying your income tax on a quarterly basis can help simplify that matter or simply diverting 25% each month to that tax account will help alleviate the tax surprise.
In any case, just remember that your “income” in this budget is your remaining available funds after accounting for taxes.
50% for Regular Needs
In this budget system, you’ll allocate your monthly income into three categories. The first of these is your “needs” category. From this category, you’ll pay for routine necessities such as:
- Housing (rent or mortgage)
- Food
- Self-Care
- Transportation
- Essential utilities (water, electric, gas, and internet)
- Insurance (personal, vehicle, and home)
- Minimum loan payments (student loans, credit cards, and the like)
- Childcare
- Routine medical expenses (medications and therapy)
Under this system, you’ll allot 50% of your monthly income to paying these necessary expenses. In other words, a full half of your monthly income should be used on “the essentials.”
I love that they included self-care on this list of essential items. Self-care is necessary to remind yourself and others that you and your needs are important too. Click To TweetThat being said, you’ll need to break down this 50% allotment into smaller divisions. This will help you prevent any one of these expenses from eating up too much of this category’s funds.
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30% for Wants (50/30/20 Budgeting Method)
Your second category under this system is everyone’s favorite. From this category, you’ll pay for those goods and services that you “want.” Moreover, you’ll allot 30% of your monthly income to pay for these “wants.”
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In truth, differentiating between a “want” and a “need” can be challenging. In fact, that’s one of the biggest reason’s personal budgets come up short of expectations.
However, there are a few regular “wants” that many people can budget for. These include:
- Shopping
- Meals out
- Non-essential travel
- Entertainment
- Monthly subscriptions (Netflix, Hulu, Spotify)
“Wants” can also be hidden in the “needs” category listed above. For example, buying an expensive food brand can be considered a “want” to a degree. Buying generic brand foods can help save those “want” funds for other larger uses.
If you are struggling to know the difference between a “want” and a “need,” ask a trusted friend. They can often help evaluate if you are overstating the value of something that is actually a “want.”
As a rule of thumb, you can also consider if a “want” is integral to your quality of life. So, if you don’t need it to live or work productively, then it is likely a “want.”
20% for Savings and Debt (50/30/20 Budgeting Method)
Your savings and debt category is essential to any good budget. After all, the goal of any budget is to save money while paying off debt.
This category allows you to grow your savings while also paying down lingering debts. 20% of your income will go directly to a savings account that you don't touch.
For example, your checking plus savings balance might say $1560. That means you only have $60 to spend on your wants. The $1500 stays in savings.
Then, you want to pay down debt.
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Also, the nature of your savings in this category may change over time. As you advance in your career, for example, you may add 401(k) payments or save for a college fund.
Why Do People Like the 50/30/20 Budgeting Method?
Most folks like this system because it is fairly rigid on the surface. But beneath the surface, there’s plenty of flexibility. This can be seen in the savings category, for example.

However, even the larger elements of this budget method can be altered slightly. This is the case with the 20% and 30% categories.
Let’s say you set a goal to increase your savings quickly. To do that, you could raise your “savings and debt” allotment to 30%. In conjunction, you’d also lower your “wants” spending to 20%.
In effect, you’d have less to spend on goods and services you desire. But you would effectively save an extra 10%. This method can also be used to pay down debt progressively.
And if you consolidate your debt into one payment, that would free up extra money for savings or wants.
Is the 50/30/20 Budget Right for You?
So, how does the 50/30/20 budget method sound to you? If it interests you, then now is a great time to try it out. Many people find success with this system.
Before you set this budget in motion, though, be sure to establish your spending priorities and goals. You may even choose to right them down or share them with a partner. This can help you keep to your commitments over the long-term.
And if you need to make extra money, check out these articles:
This could really be the method that helps you rebuild your personal finances. Give it a try and see this method’s reliable results for yourself!
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