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What is the 50/20/30 Budget Rule? (And How To Use It!)

If you are interested in making sure your money is appropriately allocated when it is spent, the 50-20-30 budget is a perfect place to start.
June 12, 2023

Making money is great, but knowing what to do with it is what can really separate the financially successful from those who struggle. The 50/30/20 budget rule has been around for quite some time. Those who need extra help knowing what to do with money have found that this rule has made a major difference in financial health. What is this 50/30/20 rule? Could it be a good fit for you? We have all the answers you need to get started and begin managing your money effectively.

What is the 50-20-30 Budget Rule?

The 50-20-30 budget is a way to split up your after-tax income to manage your money wisely and effectively. When you have finished paying the taxes on your paycheck 50% will go towards your needs, 30% will go towards your wants and 20% will go towards your savings.

How to Set Up Your 50-20-30 Budget

Setting up the 50-20-30 rule budget is not all that difficult to do. If you have a job where you make the same amount of money each week, this process will become even easier. Let’s look at how you will need to break things down to ensure that you are splitting your money correctly.

Start with Essentials (50% of Your Income)

With the 50-20-30 rule, 50% of your income will go to your needs. Your needs are things like your home, electric bill, food, water, car, etc. – the costs that you need to pay each month to keep you clean, sheltered, and employed.

In an ideal world, your needs should not require more than 50% of your post-tax income. If you find that when you try to split your post-tax income and 50% will not cover your needs, then you might need to find ways to cut costs. Can you downsize to a smaller home or apartment? Can you sell your car in exchange for a cheaper one or public transportation? Can you start using discount stores and couponing to save on groceries?

Budget for Your Wants (30% of Your Income)

Although it can unfortunately often be the reality, no one wants to work exclusively to pay for your needs. Budgeting 30% of your income towards your “wants” is a great way to stay motivated and keep yourself and your family happy.

Your “wants” budget can go towards things like a vacation fund, movie theater tickets, toys for your kids, the occasional date night, etc.


Save What’s Left (20% of Your Income)

Ideally, you should save 20% of your income left for savings. This can be immediate savings or long-term retirement savings. The better you are at saving money, the easier it is going to be to retire someday.

Saving money at a consistent rate, starting at a young age, is the best way to guarantee that you will one day have enough to retire. Even if 20% doesn’t feel like it is all that much money, this amount will add up quite quickly.

If you can’t imagine putting 20% of your income away right now, start out slow. Start by saving 5% every week for a few months, then increase to 10%, then 15 etc. until you’re able to save 20% of your income every month. When an emergency comes up, you’ll be glad you did!

How to Start Budgeting

Now that you have a better idea as to what this 50-20-30 budget is, it’s time to start putting this system into place. There are a few ways to get started, but these are some essential tips that you can follow.

Get Good At Math

When it comes to budgeting, you must first know exactly what you make, when the money is delivered, and what your payments and responsibilities look like throughout a month. If you are lucky enough to have early wage access (through the Rain app), setting up a budget can sometimes be quite a bit easier.

Early wage access gives you access to your money almost immediately after making it. This is an excellent option for starting to allocate your funds to the necessary sources as soon as they come in. When you have to wait two weeks or longer for payday, it can be a lot harder to visualize what you’re making and understand where it all goes!

Set Some Goals

Aside from the 50-20-30 budget, you should be setting goals for retirement, savings, and even some of your wants as well. If you want to buy a new car or take a vacation, write that down and start considering how much this will fit in your budget.  

Setting goals does not need to be complicated; pick some simple things and work to achieve them. Goals will help you stay on track with your budget.


Check In On Your Progress

Setting up your budget is easy, but falling off track is even easier. Check in on the progress of your budget each month. See if you were able to stick to the 50-20-30 rule and if you were not, consider what adjustments you can make in the following months. Try to be hard on yourself when it comes to budgeting; cheating will only hurt you in the long run.

Conclusion: Is The 50/20/30 Budget Worth Trying?

There are plenty of different types of budgets out there to choose from. At Rain, we like the concept of the 50-20-30 budget because it is simple enough to start today. If you are interested in making sure your money is appropriately allocated when it is spent, the 50-20-30 budget is a perfect place to start. It is not always easy to know what is right and wrong when it comes to personal finances. This budget gives people direction and a clear plan to move forward towards financial success. Good luck!

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