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If you hate keeping track of your spending but know that you need a budget in order to stay on top of your finances then the 50 30 20 budget might be just perfect for you.

According to Nerdwallet, the average household has $6,929 of credit card debt alone (source).

I’m not sure I want to know how many of those homes actually have a working budget.

The 50 30 20 rule will help you to keep an eye on your money whilst not having to have to do an awful lot.

I know I hear you loud and clear.  What exactly is the 50 30 20 budget?


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What is the 50 30 20 rule?


The 50 30 20 rule is a simple way to divide up your money into percentages.

The idea here is that you split your money into sections being:




50% of your budget should go towards your needs.

30% to your wants and 20% should be dedicated to savings.

These percentages should be worked out after tax has been deducted.

It’s a pretty basic formula to follow which will put you in charge of your expenses with minimal structure.

There are of course pros and cons to using the 50 30 20 budget and we shall go over those in just a moment.

In order to use this system effectively, you need to make sure that you understand the 3 different categories and be able to make a distinction between them.


Budgeting around the 50/30/20 rule

The 50/30/20 budget can help you plan your money


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50% for your needs


Needs are things that you can’t do without or mean that without them your lifestyle would be completely compromised.

Things that fall under needs would be items such as rent or mortgage, healthcare, groceries, debt repayments, and transportation.

In this section, your debts can be kept to the minimum payment amount.

It’s really important that you understand what your needs are.

You don’t need to have cable or even the internet for that matter (unless of course, your work life depends on it).

Make sure you are being truthful about what your actual needs are and don’t confuse them with your wants.


Spending money


30% your wants


I guess you could say that wants is almost the fun part of it.

Whilst this is true you still need to reserve a certain amount of restraint here.

The idea is not that you think, oh great I’ve got 30% of my income to buy whatever I want.

Oh no, that is far away from the truth.

Your 30% could be spent on things like unlimited internet data, cable, clothes or getting your hair done.

This does not mean that you should blow your money in one sitting.

You should think of it more along the lines of I have 30% of my income to do something constructive with.

You can use that 30% to pay a little extra on some of your debts.

By paying a little over the minimum on a credit card bill you can save yourself hundreds of dollars in the long run.

Managing your money is about being smart with it, not simply just finding ways to be able to spend as much as you want on what you want.

Believe me, there are no debt free people out there who walk around spending money frivolously.

EVERY SINGLE DOLLAR has a plan and a purpose.

If you truly want to be able to better manage your money then it would be a good idea to hold back on unnecessary spending and focus on trying to clear debts and put good money principals into place instead, like a savings fund or an emergency cash fund.

To help you decide what should go in this section, just remember that you wants are not needs so technically you could do without them.


50 30 20 budget


20% for savings


Never underestimate the power of your savings.

Your savings have the capability of keeping you out of debt.

You could even say that they are your safety net.

When you look at it this way you realize how important it is to put money away for the future.

You should work towards saving for things like an emergency fund, retirement, and extra debt payments.

Even though your debts are technically listed as part of your needs they can actually be covered in all 3 sections.

The more you can put towards paying off debt the more money you will be able to save in the future.

There are obviously things that are wrong with the 50 30 20 budget and it wouldn’t be right if we didn’t look at the pros and cons of it.

Let’s take a look at some of these now.


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Easy to follow budgeting tips


The pros of the 50 30 20 budget


It’s easy to use

Literally, anyone can follow the budget rules and it doesn’t take a whole lot of planning to make it work.


Great starting point

It’s a great place to start if you have no idea how to create a budget or perhaps are not ready to take the time to create one.



It gives you some structure to spending your money without being overbearing.


If you want to start saving money Acorns is a great place to begin.  It will automatically save small amounts of money for you each time you spend by rounding up.


The cons of the 50 30 20 budget


It’s easy to see the positives but its equally important to look at the negatives too which are just as important.

There are some things that the 50 30 20 budget don’t take care of and it’s important to address those, so here we go.


No real structure 

How do you know how much of your needs to put aside for your bills? There would be no way of checking to make sure that your 50% can fit in all of your needs.


Unable to track spending

There’s no way to keep track of what you have already spent.

It’s not a great way to help you get out of debt because some of the sections may have too much money allocated to them and others not enough.


No clarity

Setting aside 30% for wants can be easily misconstrued especially if you don’t have great discipline over money.

There is no clarity within each section so therefore everything is open to interpretation which leaves room for technical error.


Final thoughts on the 50/30/20 budget


Overall I would say that the 50/30/20 rule is a good place to start as its better than nothing at all.

If on the other hand, you want to get more serious about living a debt-free life, even if you live on one income then a more conventional budget would be better suited to you.

A regular budget will help you to see exactly where your money is going and will give you the foresight to see any potential pitfalls before they actually happen.

If you don’t have a budget yet, take a look here at how to start budgeting. It’s great for beginners!


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50/30/20 Budget


Find out how to use the 50/30/20 budget rule to master your finances