How to budget your money with the 50/20/30 rule

Having a strict budget isn’t for everyone. Big shocker, most people don’t find budgeting appealing!

I do recommend building an effective family budget, but there isn’t any point if you won’t stick to it. Not many people want to sit down and enter receipts into a spreadsheet.

The 50/20/30 rule is the solution that will help your finances with doing minimal work. The basic premise is that up to 50% of your income goes to the essentials, minimum of 20% goes to savings, and up to 30% goes towards personal spending.

So here are the basics of the 50/20/30 rule.

The 50/20/30 rule is the perfect budget for those looking to save money without a lot of effort. The 50/20/30 budget makes it easy to spend money every month without the stress of budgeting. This article will help you save more money by identifying three spending categories: essential expenses, savings, and spending.

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How to budget your money with the 50/20/30 rule

50% of your income goes to the essentials

Up to 50% of your income goes to the essentials that you need to survive. This money is for paying bills and setting aside money for emergencies. This money is not for luxuries such as gym membership, eating out, entertainment purposes, etc.

Your bank may offer automatic bill pay. You might consider having your essentials be auto-paid every month to minimize your responsibility.

  • Mortgage/Rent – How much does the place you currently live cost you?
  • Food – How much do you spend on groceries? Do you need to spend less money every month on food?
  • Utilities – Lights, water, sewer, natural gas, etc.
  • Insurance – Car, rental/home insurance.
  • Gas – How much gas do you use driving for a month?
  • Minimum loan payments – The minimum owed each month on any debts you owe.
  • All the small miscellaneous expenses that you require – Things like prescriptions, doctors visits, etc.
  • Emergency fund – Money you set aside for emergencies, such as, job loss or when a car breaks down. Do you have money set aside for emergencies?


20% of your income goes to savings and financial goals

You need to save money for retirement and your financial goals. A minimum of 20% should go towards investing, paying off debt, or saving for the big costly items.

  • 401K/Retirement plan – Try and invest 15% of your income in a pre-tax retirement account. If you can’t do 15% now, try and work up to it.
  • Paying off debt – Use whatever money you can as leverage to pay off debt so that you can save more money later.
  • Savings goals – Big savings goals such as new furniture or a car. These things take time to save money.

30% of your income goes to personal spending

The remainder of your income goes towards personal spending. This money is for entertainment, eating out, hanging out with friends, and gym memberships. You can spend this money however you would like.


Additional tips to help you with the 50/20/30 rule

Split bank accounts

Some banks allow you to split your bank account into sub-accounts as displayed on online banking. The main account is labeled S0-XXXXXX, and the sub-accounts are S1-XXXXXX, S2-XXXXXX, and S3-XXXXXXX.

You may be able to automatically divide money entering your account based on percentages. So you could set it up for every $100 that enters your account $50 goes to S1-XXXXXX, $20 goes to S2-XXXXXX, and $30 goes to S3-XXXXXX.

Keep your bills on Autopay

The less you have to do the easier life gets. You may already have direct deposit putting money into your bank account. So why not have your bills on autopay?

Some banks have a bill pay service that they offer members for free. Check with your bank to see if this service is offered.

This budget is all about the 20% savings

Keep in mind that the 50/20/30 rule is really all about helping you save 20%. If your expenses are more like 40% of your income consider doing 40/30/30. If you don’t need as much money in personal spending, consider upping savings even further to 40/40/20.

Try and increase the 20% as much as you can. Re-evaluate your percentages every time you get a raise.

Don’t exceed the 50% essential expenses

Keep in mind that the 50% for essential expenses is a maximum. You may be living above your means if you can’t bring your expenses down below 50%.

If you’re looking at saving money, check out our free budgeting and save money course. The course walks you through proper budgeting and identifies areas that most people waste their money! The course will help you start saving more money for your family.

John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.