Use our 50/30/20 budget calculator to estimate how you might divide your monthly income into needs, wants and savings. This will give you a big-picture view of your finances. The most important number is the smallest: the 20% dedicated to savings. Once you achieve that, perhaps with an employer-sponsored retirement plan and other automated monthly savings transfers, the rest — that big 80% chunk — is up for debate.
That leaves 50% for needs and 30% for wants, but these are parameters you can tweak to suit your reality. For example, if you live in an expensive housing market, your monthly mortgage or rent payment might spill a bit into your "wants" budget. Budgets are meant to bend but not be broken.
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Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment.
The 50/30/20 budget
Find out how this budgeting approach applies to your money.
Your 50/30/20 numbers:
Necessities
$0
Wants
$0
Savings and debt repayment
$0
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The 50/30/20 rule is a popular budgeting method that splits your monthly income among three main categories. Here's how it breaks down:
Monthly after-tax income
Before you can slice up your 50/30/20 budget, you need to calculate your monthly take-home income. This figure is your income after taxes have been deducted. It's likely you'll have additional payroll deductions for things like healthinsurance, 401(k) contributions or other automatic payments taken from your salary. Don't subtract those from your gross (before tax) income. If you've lumped them in with your taxes, you'll want to separate them out — subtract only taxes from your gross income.
50% of your income: needs
Necessities are the expenses you can’t avoid. This portion of your budget should cover required costs such as:
Housing.
Food.
Transportation.
Basic utilities.
Insurance.
Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment bucket.
Child care or other expenses that need to be covered so you can work.
Distinguishing between needs and wants isn’t always easy and can vary from one budget to another. Generally, though, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:
Monthly subscriptions.
Travel.
Entertainment.
Meals out.
20% of your income: savings and debt
Savings is the amount you sock away to prepare for the future. Devote this chunk of your budget to paying down existing debt and creating a financial cushion.
How, exactly, to use this part of your budget depends on your situation, but it will likely include:
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
The 50/30/20 rule can be a good budgeting method for some, but it may not work for your unique monthly expenses. Depending on your income and where you live, earmarking 50% of your income for your needs may not be enough.
It's a simple rule of thumb that suggests you put up to 50% of your after-tax income toward things you need, 30% toward things you want, and 20% toward savings.
Hopefully, you wouldn't do this, but the way the 50/30/20 budget is set up, it can cause high-income individuals to spend a lot of money on things that they don't need and not save enough for important financial goals.
Bottom Line. Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.
The 60/30/10 budgeting method involves allotting 60% of your monthly income toward your needs, 30% toward your wants and 10% toward your savings. The format may look familiar as it follows the same structure as the long-standing 50/30/20 budgeting method.
The average monthly expenses for one person in 2022 were $3,693, up 8.5% from 2021. That translates into an increase of $287.75 per month. The 2022 average for annual expenses was $44,312. That is less than half of the average expenses for a family of four, which was over $100,000.
When following the 10-10-80 rule, you take your income and divide it into three parts: 10% goes into your savings, and the other 10% is given away, either as charitable donations or to help others. The remaining 80% is yours to live on, and you can spend it on bills, groceries, Netflix subscriptions, etc.
A 401(k) can count as savings in a 50/30/20 budget plan. But if 401(k) contributions are automatically deducted from your paycheck, they're not included in your take-home pay calculation.
On a $60,000 salary, which roughly translates to $50,000 after taxes (depending on your location and tax rates), 60% would be about $30,000 per year, or $2,500 per month. Savings (20%): This portion should be allocated towards your savings, investments, emergency funds, or debt repayment.
50/30/20 explained. The basic idea of the 50/30/20 rule is simple. You allocate 50% of your post-tax income to “needs” and another 30% to “wants.” That leaves you with at least 20% of your net income that you're able to save or use to pay down existing debt.
Let's consider an example. Say your monthly income is $4,000. If you're using the 30% rule to determine how much you should pay in rent, multiply $4,000 by 0.3 (30%). The maximum amount of money you should spend on housing every month is $1,200 according to this budgeting strategy.
First, let's look at some statistics to establish a baseline for what a solid retirement looks like: Average monthly retirement income in 2021 for retirees 65 and older was about $4,000 a month, or $48,000 a year; this is a slight decrease from 2020, when it was about $49,000.
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
Let's suppose your monthly gross pay is $5,000, but taxes reduce that amount to $4,000. The $4,000 of after-tax wages are what you'd use when dividing your income according to the 50/30/20 budgeting rule. That means you'd have $2,000 (50%) designated for needs, like housing, groceries, and minimum loan payments.
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