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Home > Tools & Resources > Building a Budget: Getting Started With 50/30/20
Building a Budget: Getting Started With 50/30/202/2/2022

Getting started with 50/30/20

50/30/20 is a proportional budgeting system, meaning you divide your monthly income into different categories based on percentage. It's simple and flexible, which makes it a great option for beginners.

Calculate Your Income

Your monthly net income—that's your take-home pay after taxes and payroll deductions—is used to determine your spending limits

For example, if your monthly net income is $3,000, you should be spending:

  • 50%—$1,500 on needs
  • 30%—$900 on wants
  • 20%—$600 on savings


Did you know... the 50/30/20 budget comes from All Your Worth, a book by Elizabeth Warren and Amelia Warren Tyagi.


Define Your Categories

The 50/30/20 budget divides your monthly spending into three categories: Needs, Wants and Savings.


Needs are your essential expenses—skipping them would lead to serious consequences like illness, job loss or legal trouble; examples include:

  • Housing/rent
  • Basic utilities
  • Food
  • Clothing
  • Health care
  • Transportation
  • Taxes
  • Minimum payments


Budgeting tip: Many expenses are a mix of needs and wants—if a bill falls under multiple categories, split its total between them.



You'll find that wants account for a lot of your spending—these are all the non-essential products and services you buy; examples include:

  • Cable/Internet/Phone
  • Restaurants/takeout
  • Entertainment
  • Travel
  • Fashion
  • Electronics
  • Subscription services


Savings are any expenses related to debt repayment and savings plans; examples include:

  • Emergency fund savings
  • Student loans
  • Credit card debt
  • Retirement savings
  • Down payments
  • Personal savings goals

Tracking Your Spending

Track your spending for at least two months using the method you’re most comfortable with:

  • Apps
  • Online banking
  • Spreadsheets


Budgeting tip: Don't forget to factor annual payments into your budget—divide the annual payment amount by 12 to get the monthly cost.


Compare your monthly spending to your 50/30/20 totals:

  • Needs goal: $1,500/$1,300
  • Wants goal: $900/$1,500
  • Savings goal: $600/$200

Don't worry if they don't match up at first—start shifting your spending habits to better align your totals with the 50/30/20 guidelines.

Make It Work

If your spending isn't matching up with the 50/30/20 guidelines, you have a few options:

  • Reduce your spending: In order to hit the 50/30/20 guideline, you may need to sacrifice some of your wants or find cheaper alternatives for your regular monthly expenses.
  • Increase Your Income: If you're consistently overspending and unwilling to compromise, the only solution is to make more money—look for side gigs to increase your income.
  • Modify Your Percentages: Make sure your budget matches your financial goals—for example, if paying off debt is your top priority, a 30/10/60 budget will get you there faster.

Sources: All Your Worth,

budgeting infographic


5 Sneaky Expenses to Keep On Your Radar

When setting up a budget, it's easy to list all your major expense categories, like your rent or your student loan payment. The tricky part is keeping track of all those little extra expenses—the ones that most people forget to include in their budget in the first place.

Learn More


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Budgeting is a skill that helps you to make smart decisions with your money and we're here to lend a helping hand with budgeting and savings calculators to help you spend less, save for your dreams and goals, and prepare for life's curveballs.



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