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Need to budget better? Here’s the 50/20/30 Rule

Need to budget better? Here's the 50/20/30 RuleNeed to budget better? Here's the 50/20/30 Rule

New to budgeting? Try this common and easy formula.

Managing your money is important and its probably one of the hardest things you can master in this life of adulting but its definitely beneficial especially if you’re looking to buy a home. With budgeting, you need to organize and make some tough decisions and sacrifices on how you should use/spend your money. It can be difficult, but if you haven’t already heard of it, there’s a simple and easy technique called the 50/20/30 rule. Splitting your finances into 3 main categories can help you track how much money you spend and how much you need to save as well.

The 50/20/30 Rule:

  • 50 percent of your income should be put aside towards living expenses. Living essentials like rent/mortgage, utilities, gas, car note, groceries. This can vary depending on your income and also where you live.


  • 20 percent of your income should to your savings, whether it may be an investment, debt-reduction (credit card/student loans) payments or just financial goals that you want to accomplish. This percentage can also fluctuate because some may have student debt that’s already at the 20 percent mark.


  • 30 percent of your income should be for leisure. This is anything that isn’t a necessity like: entertainment, shopping, partying, vacation, etc. Keep in mind, not everyone spends 30 percent each month for leisure, so the less you use in this category the more you can save or have in the other.

If the 50/20/30 rule doesn’t really work out for you due to your income or spending, try to plan out a way to move some of your expenses in the right category. Maybe change your spending habits, cut down on going out every weekend, in order to save or reach your financial goals you will have to sacrifice certain things.

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