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What is the 50/30/20 budgeting rule?
Rounding it up
The 50/30/20 budgeting rule by US Senator Elizabeth Warren divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings.
Your “needs” include obligatory expenses like rent or mortgage payments. Your “wants” are your basic pleasures of life. You should allocate the last 20% towards setting up an emergency fund, or paying down any high-interest debt.
To begin with the 50/30/20 budget, calculate your after-tax income on average. Then take a look at your spending habits to categorize your expenditures. Next, identify easy, low-hanging opportunities to save.
Remember that the 50/30/20 number is a guideline, and you can (and should) tweak them according to your own financial goals.
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