What Is the 50/30/20 Budget Rule and Does It Really Work?

A Popular Budgeting Guideline Is The 50/30/20 Rule. (Image Source: Shutterstock)

What Is the 50/30/20 Rule?

  • 50% goes to cover your needs
  • 30% goes to cover your wants
  • 20% goes toward financial goals
How To Manage Your Money (50/30/20 Rule)┃Marko — WhiteBoard Finance

Budgeting Allocation

  • Total after-tax income = $5750
  • 50% to needs = $2875
  • 30% to wants = $1725
  • 20% to financial goals = $1150 ($250 of which is already catered for)
Rule of Thumb for Allocating Budget to Reach Financial Goals (Image Source: Shutterstock)

Is 50/30/20 the Best Rule to Meet Your Financial Goals?

50/30/20 Budget Rule To Reach Their Financial Goals (Image Source: Shutterstock)

Other Budgeting Rules

The 50/30/20 rule is not the only percentage guide (Image Source: Shutterstock)
  • The 80/20 rule: This guideline is even simpler than the 50/30/20 rule. It requires that you put 20% aside for savings and do whatever you want with the rest. This may not be the most practical method for people who are struggling financially. After all, you need to meet your fixed costs every month, no matter how badly you want to save that 20%.
  • The 70/20/10 rule: In this case, you allocate 70% of your after-tax income to living expenses (a combination of needs and wants), 20% to debt payments. and 10% to savings.

Conclusion

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