The 50 30 20 Budget

Is 50 30 20 Right for You?

If you’ve looked up anything about personal finance in the last few years you’ve probably heard of the 50/30/20 Rule; and if you read my last post on responsible money management, you’ll know that 50/30/20 is a great general outline that you can use to budget your money. Today, we’re going to go a little bit deeper. Digging into what this ‘rule’ actually is, when to use it, when NOT to use it, and how to actually apply it in your own money plans.

What IS the 50-30-20 Rule?

The 50-30-20 Rule is the concept that 50% of your income should be spent on “Essential Spending”, 30% of your income should be spent on “Lifestyle Spending”, and 20% of your income should go to savings.

Personally, this is where I started with my finances, and I think it’s a GREAT starting point.

Especially if you’re completely new to managing money, and have no idea how much you should be spending on what!

So let’s break it down together, what should be considered in each of these categories?

Essential Expenses

An essential expense is something that you pay for that’s almost non-negotiable. Something like rent, groceries, or your car maybe.

It’s anything that you NEED to have, basically to survive as an adult human.

Lifestyle Spending

Some people also classify ‘Lifestyle Spending’ as ‘wants’.

These are things like going to a movie with your friends, going to a nice restaurant with your partner, your netflix subscription, anything that you’re more ‘choosing’ to spend your money on.


Our savings spending is a little more self-explanatory, but there are many different WAYS that you can save money. You can have general savings, like an emergency fund, or vacation fund, you can have investments or retirement accounts, you can have cash underneath your pillow! All of that is considered ‘savings’ and it’s sort of the hope that you’re contributing to these on a regular basis.

Just like you’re regularly paying for other things, you should be regularly ‘paying’ to your savings as well.

When to Use 50-30-20:

If you’re just starting to organize your finances this can be an amazing tool to align yourself. Understanding how YOUR expenses are fitting into this outline can really help you structure your spending. If you are spending WAY too much in one category over the other, then you’ll know you’ll have to tighten up, or relax a little. ie. If you see you’re spending like 60-70% of your income on lifestyle spending, that’s a pretty good sign to reign it back.

OR, on the other end, you can figure out that you’re actually saving WAAY too much of your income and you can actually give yourself a bit of a break knowing you’re on the right track.

Another great place to use this rule is when you’ve just had a big lifestyle change. If you just got a promotion, or a new job with a higher salary, it can be really easy to just spend all of that new money.

By going back to basics, and using this rule, you can figure out exactly how much you can change your habits without breaking the bank!

When Not to Use 50-30-20:

If you’re already living a pretty frugal lifestyle, you don’t NEED to match 50 30 20. If you feel like you want to save a lot more, and WANT to live a more minimalist life, then yea, these numbers probably won’t make sense for you!

This method also doesn’t really work during debt payoff. It’s hard to know where to actually fit debt into this system. Does it go into the essential spending? Or does it count as ‘savings’?

When I was doing this, I WAS actually paying off debt, but I put my debt pay off into essential spending. Because for me, that debt payment, was an ‘Essential’ Bill. This forced me to actually ‘pay myself’ more by keeping the savings amount at that full 20%. (if you’ve watched my channel for a while you might know that I actually switched these numbers around, so my savings amount was actually 30% and not 20% but regardless I kept it at the full amount for the percent I was using)

Obviously, I’m not trying to be a hypocrite I’m not saying you CAN’T use this when you’re paying off debt, but when you are, there’s usually not a lot of room to play around with those percentages. Sometimes, your ‘required’ debt payments make your essential spending WAY higher than 50% of your income. On top of that, if you’re paying more than your minimums on your debt payments (which I suggest you do, see this post) then you have to make the choice:

“which amount am I going to put towards my debt payments, and which amount am I going to ‘Pay myself’ with?”

At that point, you might find that it would actually be smarter to make that ‘savings’ amount smaller than 20% so you can put more towards your debt repayment. Regardless of your situation I always suggest people calculate these numbers, so you KNOW how much you’re spending on what, but to actually ‘stick’ specifically to 50-30-20, sometimes it doesn’t work in every situation.

How to make a 50-30-20 Budget:

If you’ve decided you’d like to try the 50-30-20 rule, here is how I suggest applying it to your budget:

Step 1: Have a budget

If don’t have a budget, or a money plan, you need to do this. We need to be totally clear what your expenses are, and how much they are, before we attempt to put them into the categories for 50-30-20. I’m going to link my ‘How to make a budget’ video down in the description, but for now, I’ll just say you need a BIG list of ALL your expenses and their amounts.

Step 2: Categorize & Calculate

Once you have your expenses all laid out, you’re going to go through the list and decide whether it’s Essential, Lifestyle, or Savings. When you’re done sorting through them, take the amounts and calculate how much you’re spending on each one, AND what percentage of your income it takes up.

Step 3: Reorganize

Play around with the numbers until you’re happy with the results. Find out what expenses you can move around, eliminate, or add, to match the percentages you want to reach for each category!

If you’re confused:

Now If you just heard all of that and went: Omgsh, so much work I will NEVER do it! OR, if you just want to make your life a million times easier, you’re going to want to check out my free resources page.

That’s right! I’ve made a super easy fill-in-the-numbers worksheet to go along with this video so you can figure out if your budget matches 50-30-20 without even doing the calculations yourself!

Just visit the resources page and sign up to receive access! Leave me a comment down below: what’s your opinion on the 50-30-20 rule? Are you going to use it for your finances? Or do you have a different breakdown that works for you?