How the 50/30/20 Rule Can Help You Budget

Image Credit: Instagram

Budgeting is a a hard thing to start, and an even harder thing to continue. That said, all of us will need to tackle the skill at one time or another.

If you’re still looking for a method that works for you, consider the 50/30/20 rule to get you going.

The rule was first popularized by Senator Elizabeth Warren and her daughter Amelia in their 2006 book All Your Worth, and, while no strategy works for every single person, experts agree their rule is a great starting point for most.

View this post on Instagram

A groundbreaking approach to getting control of your money … #AllYourWorth #TheUltimateLifetimeMoneyPlan #author #ElizabethWarren #AmeliaWarrenTyagi #narrator #ChristinaMoore #audiobook #coverart #originalart #nonfiction #money #finances #business #debt #bills

A post shared by Recorded Books & RBdigital (@recordedbooks) on

The duo calls it the “balanced money formula,” and they agree that sticking to this rule of thumb should keep your finances healthy.

“It’s the right place for most people most of the time, and it is a good place to aim for in your lifetime money plan.”

If you want to follow the rule, you’ll need to budget 50% of your take-home pay for necessities (housing, utilities, loan payments, food, and tuition; perhaps also clothes and transportation).

View this post on Instagram

We’re currently LOVING the 50/30/20 budgeting rule. 50% of your income on your needs, 30% on your wants and 20% on your savings. Simple but effective. Happy budgeting • ? @budgetqueen_blog #budgeting #budget #503020rule #bugetingtips #howtobudget #budgets #femmefinanceclub #femmefinance

A post shared by Fempire Finance | Money Talk ? (@fempirefinance) on

The next 20% of your take-home pay should go toward savings or retirement goals, or paying down debt, building an emergency fund or saving for a vacation.

Your last 30% is for your wants, or lifestyle choices – shopping, entertainment, gym fees, pet expenses, and the like.

There you go. Simple, right?

View this post on Instagram

I love this percentage. Try this the first time you do the budgeting. Separated bank accounts for essentials, savings, and wants can make you see clearly how much money left for each category. . . . . . . #budgeting #budget #503020rule #503020plan #debtfreecommunity #cashenvelopesystem #cashenvelopes

A post shared by MoNa (@monaintariani) on

It’s a new year, and if one of your goals is to get yourself on sound financial footing, the Warrens and their tips for working toward financial freedom could be just the ticket you need to hop on the train!

What’s your favorite financial tip? Share it with us in the comments!