How to Budget Your Money With the 50/20/30 Guideline

Laura Shin

When it comes to money, there’s certainly no shortage of ways for us to spend it—food, rent, retirement accounts, a down payment on a house, gym memberships, gifts … you get the picture.

In fact, it’s why LearnVest Planners are often asked one key question: “So where should my money be going?”

When it really comes down to it, the answer is different for everyone. You may be in a hurry to pay off debt, so you’re willing to spend less on eating out in the meantime. Or you might live in a city where rent is prohibitively expensive, so you have to allocate more of your paycheck to housing.

So what’s a budget-perplexed person to do? While we can’t give you a hard-and-fast rule for where to put your money, we did come up with a general benchmark to consider if you’re just starting to set up a budget: the 50/20/30 guideline.

Whether you’re a parent with two kids or a recent college grad working your first job, this 50/20/30 guideline can help you not only figure out how much you may want to allocate to each area every month; it can also help you determine the order in which your money can be allocated.

50/20/30 Broken Down

The 50/20/30 guideline can be easy to follow because instead of telling you how to break down your budget across 20 or more different categories (who could possibly keep track of that?), it splits everything into three main categories:

1. Fixed Costs
These are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities and car payments. We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you’re committed to paying them on a monthly basis.

When it comes to fixed costs, we generally suggest that you aim to keep your monthly total no more than 50% of your take-home pay.

Tip: If you’re trying to make more room in your budget, fixed costs can be a great place to trim. For example, are there any bills or subscriptions you could reduce or cancel entirely?

RELATED: The One-Number Strategy: A New Approach to Budgeting

2. Financial Goals
Consider putting at least 20% of your take-home pay toward important payments or contributions that will help you secure your financial foundation. At LearnVest, we believe there are three essential goals everyone should strive for: paying down credit card debt, saving for retirement and building an emergency fund. But your financial goals can also include larger savings priorities like a down payment on a new home.

Tip: LearnVest Planners recommend automating your savings contributions and debt payments to help make sure you’re saving consistently—and to help ensure you don’t miss a payment!

3. Flexible Spending
Finally, consider budgeting no more than 30% of your take-home pay toward flexible spending. These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas.

We include groceries in flexible spending because even though food is a necessity in your budget, how you spend on food can vary. Some weeks you might eat out more, while others you may buy more groceries to cook at home. At LearnVest, our Planners often say that it doesn’t really matter what you spend your money on each month in this category, as long as you’re aware of your spending and not going over your total flex budget each month.

Tip: To determine your flex-spending amount, we recommend first subtracting your fixed costs and financial goal contributions from your take-home pay (the amount that hits your bank account after taxes and any 401(k) contributions). This way, you’ll know that the amount that’s left for flexible spending is truly yours to spend however you want.

RELATED: 14 Smart (and Easy!) Tricks for Cutting Costs in 2014

Seeing 50/20/30 in Action

The 50/20/30 guideline is just that—a guide. It can be a helpful benchmark when you’re assessing where your money is going, but it can also be adjusted to your specific lifestyle and goals.

To better explain what we mean, let’s compare two hypothetical budgets—one for Molly and one for a couple, Sarah and Tim.

RELATED: The 3 Times I Used My Emergency Fund: Was I Right to Dip Into It?


Molly is a 22-year-old recent graduate with her first job, working in Chicago. She has student loans, but she is still able to meet her student loan payment every month and contribute to a Roth IRA, plus pay all her bills.

Her income: $36,000 a year

Her take-home pay after taxes: $2,250 a month (we’re assuming 25% of her salary goes toward a combination of taxes and her 401(k) contributions)

Fixed Costs:
Rent: $775
Transportation: $115
Utilities (including phone and internet): $135
Gym and subscriptions: $75
Total: $1,100, which is about 49% of her take-home pay

Financial Goals:
Student Loan: $150
Roth IRA contributions: $200
Emergency fund: $75
Backpacking trip fund: $50
Total: $475, which is about 21% of her take-home pay

Flexible Spending: $675, which is 30% of her take-home pay

Because Molly is on a tight budget, her fixed costs are very close to the 50% limit. Still, she is able to make her student loan payment and even put 9% of her take-home pay toward retirement, where the money should have a long time to grow.

RELATED: 5 Money Mistakes Even Good Savers May Make

Sarah and Tim

Sarah and Tim are in their mid-40s and have two children nearing college age.

Their household income: $150,000 a year

Their take-home pay after taxes: $8,750 a month (we’re assuming 30% of her salary and her husband’s go toward a combination of taxes and their 401(k) contributions)

Fixed Costs:
Mortgage: $2,000
Car payment and insurance: $775
Gas: $275
Utilities (including hone, TV and internet): $275
Total: $3,325, which is 38% of their income

Financial Goals:
Roth IRA contributions: $900
529 account contributions: $1,400
Family trip fund: $400
Emergency Fund: $535
Total: $3,235, which is about 37% of their take-home pay

Flexible Spending: $2,190, which is about 25% of their take-home pay

Sarah and Tim’s situation shows that you don’t need to stick hard and fast to the 50/20/30 guideline. The benchmark for fixed costs is “no more than” 50%, and Sarah and her husband have actually been able to keep them well below that threshold. They paid off one of their cars a while back and their mortgage payment is well within their means. 

Because they’ve kept their fixed costs low, they are able to contribute to their kids’ 529 accounts. At the same time, they are on track to max out their Roth IRA contributions because saving for retirement is a higher financial priority for them than saving for their children’s college funds. That’s because you can borrow for a college education later if you need to, but you can’t borrow to cover retirement! Sarah and Tim are balancing their desire to save for their children’s future education without sacrificing their own retirement needs. 

In order to make room for 529 savings, they have decided to limit their flexible spending to only 25% of their take-home pay.

One Note About Retirement

As you might have noticed, the 50/20/30 guideline applies only to take-home pay. Any contributions you make to retirement before your paycheck hits your bank account are not included. For that reason, you may actually be contributing more toward your financial goals than this breakdown would suggest. And you may find that it’s a good thing to keep that retirement money out of sight, out of mind!

RELATED: 6 Common Retirement Savings Mistakes to Avoid

(If you are self-employed and don’t have your retirement contributions withheld from your paycheck, consider contributing more than 20% of your take-home pay toward your financial goals, if you can afford it. This could help you make sure you’re contributing enough to stay on track for retirement.)

How the 50/20/30 Guideline Can Apply to Your Own Budget

If you’re just starting to put together a budget, the 50/20/30 Guideline can serve as a useful benchmark for how to divvy up your paycheck. When it comes down to it, though, how you spend (and save) your money depends on your specific goals and lifestyle.

As part of the LearnVest Action Program, you can work with a dedicated Planner who can give you a clear plan of action for your money, including helping you to create a budget that has the right balance for you. If you’re curious, you can get started by trying out our online budgeting tool for free.

budgeting screenshot final


LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

  • OcsarGrouch

    This is so unrealistic!! A) 22-year-olds do not make $36K straight of college and would be hard-pressed to find an apartment in Chicago for $700. A couple earning $150K is certainly not paying a $2,000 mortgage. A large part of America pays over 2/3 of their income towards mortgages, rents and are unlikely to be able to sock away the amount suggested here for savings.

    • Missouri

      My daughter got 50k right out of college as a nurse and my son got 40k. Mid west.
      A lot of people I know paid 1x salary for house and a number of others paid 1.5x
      Assume they paid 225k for house but put down 20% so 180k loan at 4.5% with 1% in prop tax and say 70/mo in insurance. So 1100 per mo. In Midwest, that is very nice large new home. Say you got a nice one for 180k with 40k down but on 15 year

  • Spgfld Tom

    Ms. Shin maybe assuming that everyone has taxpayer subsidized ObamaCare. FYI: my Comcast bill (cable and internet) is $165. Only the rates on my non-taxpayer subsidized health insurance rise faster. I’m sure Ms. Shin realizes that employers will be dropping their health insurance benefits (Obama just postponed the “employer mandate” part of the law until after the mid-term elections).

    • Missouri

      He is assuming they get corporate medical and the part you pay is taken out before you get the take home.

  • Mandi

    I don’t think you all are in the real world. I bring home 2600 a month and raising my grandson who is 16. My utilities are 178.00 for electricity (budgeted amount with AEP in WV) which at the end of the year I barely break even! 69.00 for WV American Water and 60 for sewer which is separate! The water bill is ridiculous – sometimes it is less than more and I use the same amount each month! Car insurance on a nearly 3 year old chevy aveo 163.00 a month and I have a perfect driving record! The reason it is 163 is my credit score is 625. I had some set backs due to health and caused my credit score to drop which makes a person like me have to pay higher interest and higher insurance, etc. it is sad. Car payment 288.00 a month, gas to work each month (I drive 45 miles ONE WAY 5 days a week which averages around 90-100 miles a day including weekends. $350.00 a month (our gas averages 3.50-3.69 a gallon!) 150.00 a month for 4 small limit credit cards; 400 for groceries/includes shampoo, washing detergents, toothpaste, deodorant, toilet tissue/paper towels, etc. cleaners, gas to mow my grass(costs 22.00 to fill a 5 gallon gas can which lasts about a month). Lunch at work averages 4.00 a day, eat breakfast at home, dinner at home, 150.00 a month going into savings, 7.99 Netflix, 10.29 xbox membership, 93.00 direct tv which began at 49.00 for 1 year and then went to 93.00- am trying to get it lower without sacrificing channels I like, 160.00 a month for a personal loan which I am trying to get paid off, 191.00 for health insurance for myself, misc. on clothing for myself and grandson and other misc. costs averages 100.00 a month, 300 for car maintenance a year! (includes tires, etc), household items such as light bulbs, repairs on plumbing, appliances, etc. 65.00 a month, I have no rent. Doctor bills that insurance does not cover runs around 100 a month (am a diabetic). I know I am missing other bills but this is the real world. Utilities in WV are outrageous and the utility companies are trying to get another RAISE! Personal property tax runs 293.00 a year to get the tag to my vehicle which runs 30.00 a year and I live in a very old mobile home! I don’t go out much at all and as far as recreation goes, About 3 times a year I go to the movie theater, I walk my son’s dog in the evenings for exercise. I can’t comprehend how minimum wage people make it, especially if they have kids!

  • Westviking

    you’ve got a girl with $675 a month for food, clothes, books, etc., and you think she’s going to be able to save money? how? that’s $170 a week. $25 a day.

  • Mz V

    It’s actually extremely simple you have to adjust the rule to fit you. I’m a single mom of 3 kids one who has a disability, I get no government assistance and sometimes I may get child support. This is how I apply it to fit me. Take home pay after deductions when I don’t get child support $3,280. Expenses including rent,gas,light,internet,cable,home phone, cellphone, car note car insurance, renter’s insurance, alarm monitoring, Afterschool care for 3 kids. “Fixed Expenses” $2,367, Deduct $2,367 from $3,280 I’m left with $913.00. So expenses are more than 50% percent, but I then apply the 20% part of the rule 20% of $913.00 is $182.60 which leaves me with $730.40 for food, gas, toiletries, and other expenses. So I will put the $182.60 aside and try to work with the $730, one month it works and another month I have to dig into the $182 but when I do that whatever is left of $182 be it $5 or $180 goes to savings. When I do get child support my income increases by $700 dollars, and I do the same process , Income$3,280+700=3,980 Income minus Fixed expenses $3,980-$2,367=1,613 Left over apply 20% rule Leaves $322 for savings and $1,291 for discretionary expenses, here I can actually save 20%, and have extra money. It’s not easy takes a lot of discipline, but I have managed to pay all my debt, I only have my car note, my kids want for nothing, and have every need met and more. We never ever go the movies and spend $60 for tickets, we go to the drive in and grill there so we don’t spend money on take out. We go to the county parks with aquatic centers vs water parks, we wait for sales, cut coupons, do our math before we walk out the door and yes they have brand new clothes every 3-4 months name brand but bought on sales and with discounts. We even have a dog that’s get groomed at the pet store for $60 bucks every 2 months. I can never get my nails done at the salon but we have spa day at the house. We read a lot of books, on kindle, unlimited so for 9 bucks a month we have all the “IN” books. Food we learned to go every 4 days to the store and buy only what is needed for the meals, and at the end of the month whatever is left of food budget goes to snacks for them chips cookies pretzels we buy them in bulk and last them about 3-4 weeks they have learned to differentiate wants from needs, to share and to work together, It’s not easy but doable you have to be willing to put the work and effort in. I work Overtime every time it’s offered at work, walk to the grocery store sometimes to save gas, bring lunch to work. Make extra money babysitting on days off, sometimes I offer to carpool the neighbor kids and they chip in with the gas. Excuses and complaining don’t get you nowhere.

  • J.

    10% for tithe?

  • Ally Smith

    $135 on utilities including power, gas, water, phone and internet? And are we including even basic cable in there somewhere – or is that included in the $75 a month for ‘subscriptions’? I can’t even get my power/water/gas bill under $135 without phone and internet. That isn’t even REMOTELY a realistic number.

    • Missouri

      It is for an apt. Know a guy who pays 45 av. For electrical which is only thing not included in rent. That includes heat and air in the electrical but. He is an inner apt with one window so pretty insulated. 80 for basic phone and internet. High speed internet, cell and cable are all discretionary.

  • Ann

    I love the $275 “fantasy” figure for utilities for Sarah and Tim and their two children! Unless they live off the grid and don’t heat or cool the home with the $2,000 mortgage or pay for water and sewer there is no way that amount could include utilities as well as phone, internet and cable!

    • Missouri

      Well, we have 2600 sq ft and we insulated and had high efficiency heating and cooling and put in special bulbs so we have about 200 for basic utils but Internet is 40 and we don’t do cable but do roku and netfix so now 250. I assume cell would be discretionary so with 40 for phone that is 290. Since they have 2000 vs 2600 then possible. Huge savings from doit yourself insulation and the light low energy life bulbs.

  • Katherine Alexander

    $135.00 for utilities, including phone and internet??

    • Missouri

      I know a guy in a small apt that pays 45 for utils including heating and cooling. Water is part of rent. 75 for basic internet and phone. So very possible.
      Problem is most people are saying high speed internet cost and cell phones are basic when they are discretionary.

  • Jootmo

    Sorry, but when we refuse to make giving a priority we become even more self-focused.
    I encourage everyone to make giving/donating 5%-10% off the top of your paycheck your first priority. If the majority of us would do this, the government wouldn’t have to have such a big part in helping people.
    I’d rather give directly to help someone rather than the government taxing me and then deciding (often wrongly) how to “help” someone.

  • SuwanneeSum1


  • Joe D

    Break the 20% long term financial goals down to 80% for accumulation and 20% for insurance such as life, disability income and if you’re over 45 long term care insurance. It is most important to protect what you already have. Your health and ability to earn an income are usually more valuable than all your possessions.

  • JAB

    I don’t understand the attacking of this article, it’s a guideline to set up a budget, some of you people are so angry and attack the article. maybe you should set up a budget on what you owe based on you income.

  • e123

    The utility estimates are way way off. I have a small house and am on a family plan for my cell phone and my total monthly utilities are over $350. That couple with 2 teenagers are going to spend a lot more, even if the teens pay for their own cell phones. A budget isn’t helpful if it’s not realistic.

    Also, for the single girl living in Chicago with rent and utilities so low she must have at least one roommate.

  • kittysmom

    I find it totally unbelievable that Molly only pays $135 for utilities that include phone and internet service. Makes the rest of the story unbelievable, too. Not at all realistic.

    • Stephanie

      My utility expenses per month are $22 for electricity, $25 for a cell phone, and $40 for internet. Other utilities are covered with my rent. And in my previous apartment, the rent included internet.

      And for the other complainers, I spend less than $200 a month on groceries and that includes alcohol.

      Why don’t you all have a little optimism in life? Of course not everything is rosy but it’s a hell of a lot easier to dig yourself out of a hole when you think you can.

  • somemomsomewhere

    or children

  • Mom of 3

    i have three children and all three are in some type of child care (daycare for the infant and after care for the two in school), i can barely make ends meet. let’s see a scenario for that.

  • Tater Salad

    Where are credit cards and other debt in your examples? I.E, credit card pmts, private school tuition (7th grade), food/groceries, pet care. Should these be under fixed?

  • Stan

    I realize Molly has a low income, but Sarah and Tim don’t. No where in this is there any mention of charitable giving. To us, $36,000 is “low income” but compared to the world, it puts you in the upper 10%. And “poor” people give a higher percentage of their income than “rich” do. It’s really disappointing that there is no mention of charitable giving in these budgets. I think this “investment advisor” may be one of the ones who knows the price of everything, but the value of nothing.

    • Ghost of Jam Master Jay

      Hi Stan,

      If you are serious about charitable giving, I can give you my address. I understand your point, but many responsible people make much more than Molly and are barely treading water. Simply put, the cost of living is skyrocketing compared to real wage growth in this country.

      • Stan

        I am serious about charitable giving….I have been giving away half of my income every year for several years. What makes YOU think you are more worthy to receive my giving than children in Cambodia?

  • Dan Lombardo

    Where is Electric and other Utilities — $275 a month including Phone, TV and Internet — That’s a laugh — Cable at least $125, House phone at least $50 more, cell for two, roughly $175, (add to that if their kids have phones) internet another $50 (at least) — That is $400 without stretching — Electric could easily be $150 on up — Safe to say in a large Family Home with Kids, conservative $200 — Water and Sewer maybe as much as $50 more — We are at $650 without even trying — NO ONE I know could even begin to think $275 for all of this — Plus, there are other potential costs not listed — HOA? Other Utilities like Fuel Oil — Come on and get real — Fantasy Budget for a Fantasy World… . More like a Grand a Month for a safe conservative bet on “Utilities”. Depending on where they live, this could be higher… .

    • Comment4321

      Cut the cable and home phone, get two prepaid cell phone plans for $20 per month total. I just saved you $4,000 per year.

  • Anita Gummer

    Your example for Molly was the closest to my own situation, however no student loan is 150/mo. The student loans are absolutely drowning me with a payment of 420/mo. It is impossible to save especially when i have bi weekly paychecks and constant overdraft fees that keep me living paycheck to paycheck. Trying to break into full time employment for a career puts a second job off the table. What do i do when it costs me about 72% of my income just for necessary bills? (Not including living expenses, groceries etc.)?

  • Chris Moore

    I am a recent graduate. What happens when with the 50/20/30 rule when the total of your school loans take up the entire 20% of your income?

  • a_low

    It’s a “guideline” – so you can tailor it your needs. Add Healthcare as an expense item on your budget if you see fit. Alternatively, you can open up an FSA which would be deducted pre-tax. So you would essentially only care about your take-home pay (after tax) and your FSA covers medical expenses (beyond what’s already taken out as a healthcare tax).

  • Ron Richardson

    A great job of setting out a clear step by step path. Most people don’t
    have a clue as to how much they SHOULD have left at the end of the month
    (if any). Finding that number is the focus of our own budget described
    The peace of mind of knowing where you stand is awesome.

  • coytle

    I need a new job. 71% of my income goes to fixed bills that I can’t change… Yay high cost of living in Seattle!

  • Sarah

    I know this article is two years old, but $36,000 a year as a 22 year old college graduate? I find that incredibly hard to fathom.

    • Comment4321

      The median income for new college grads is about $45k.

  • Megan Lim

    What dreadful advice. You are seriously advocating spending 80% of take-home pay? When I first saw the headline for 50/20/30 I was thinking it would be something bold like 50% savings, 20% taxes, 30% spending or something like that.

    Saving only 9% for retirement you are setting yourself up to have to work for 50+ years:

  • Bogged down in Loans

    So….what happens when my husband and I are paying $1305/month for our student Loans???

  • Dave Weitz

    First of all, I just discovered LearnVest yesterday. I’m loving the information. Thank you!! Second, I have a little confusion: I’ve read several articles in your budget section. Some writers put “groceries” in fixed or essential expenses; others put groceries in the “flexible” category. I’m thinking that LearnVest says they are a “flexible” expense but I’m not sure. Is it LearnVest’s assertion that because my grocery may vary from month to month, it is a flexible expense? Thanks in advance for the answer… and thanks for all you’ve provided here.

    • Ghost of Jam Master Jay

      Hi Dave,

      I don’t represent LearnVest in any way, but I think it’s wise to consider groceries as a fixed expense. You’re going to eat, right? Personally, I try to find a reasonable estimate for my groceries and gas, and consider it a fixed cost. It’s not always 100% accurate, but if you overestimate slightly you can protect yourself from overspending.

  • Paul Bansal

    WOW! This is an amazing article. I too champion Financial
    Literacy. Would it be ok if I used some of the tools you use on my site,

  • Ashley Tara

    Man, I gotta find out how Molly only has a $150 student loan payment. I pay $350 every month – and that’s just the minimum!

    • Ghost of Jam Master Jay

      Molly is paying the bare minimum, thereby ensuring she makes payments plus interest forever. Probably not wise financial planning in the long run.

  • Mitch Vincent

    Why are student loan debts considered a financial goal and not a fixed monthly expense? There isn’t an option to repay them, it is a constant monthly expense.



  • Truth Teller

    Actually, most of those showing up in ERs were not “teabagger’s” (to use your pejorative term) but rather young liberals who won’t pay for insurance or don’t have a job that provides it, or the poor or working poor, who didn’t sign up for Medicaid or made too much for free insurance.
    Let’s be intellectually honest, ObamaCare/ACA has only covered 10 million of the supposed 50 million purported to be uninsured, and 80% of those are subsidized by taxes on the rest of us, so it hasn’t done much to fix the issue of uninsured Americans.
    The real issue is ACCESS TO HEALTHCARE, and even the uninsured have access. Perhaps they lack an insurance card, but they have access to free healthcare through clinics, charity and pro bono health care services provided by providers (free care given by hospitals and physicians).
    It’s difficult to not conclude that the ACA was entirely built on a lie.

  • eric

    Sarah and Tim’s example is closest to my own and I was going to complain about how unrealistic the mortgage and utilities would be for my area (someone below commented “assume 1% for property tax”, omg, I’m paying 1900 a month just the escrow portion to cover taxes and insurance). but then I decided that this is a guideline and I should see how to at least get close to that giving consideration to the high costs of my area.

  • Ghost of Jam Master Jay

    I was offered a job in Chicago in the fall of 2014 that paid roughly $36,000. I turned it down because I did not consider this to be a sufficient living wage.

    Laura, I think you need to reconsider monthly expenses/fixed costs. I currently live in a major Midwestern city and my monthly expenses are about $1,900.00. That includes: rent split with a roommate, utilities (gas, water, electric), internet (no cable), Netflix, Spotify, student loan payments, dental insurance, cell phone bill, gas, and groceries.

    Every time I look at my budget planner, I almost puke. Nearly 60% of my income goes to fixed costs. Every dentist appoint, doctor’s visit, car repair, etc. eats into my “fun money,” some of which is non-negotiable (weddings, Christmas gifts, holiday travel, etc.).

  • Smith

    In the first part of this article you discuss that the Needs are fixed costs, and you describe the flexible spending as things that vary. You say that “gas” is a flexible item, yet in your second example, you put “gas” in to the “Needs” category. I’m trying to set up a budget like this, but I can’t seem to get a clear definition of what goes where? I have read several different blogs about this and none of them agree. Where does Credit Card debt fall. In many of these the “Student Loans” are part of the 20%, but the Car loan goes in the “Needs” section. I can’t seem to see where a credit card payment should go. Not all of us have the luxury of finding this budget before they acquire debt.

  • Michael Chester

    Americans are overcharged for everything and underpaid. There are so many free sources of energy yet we have to pay the electric company and still use fossil fuels to power everything. Why do you think that is? The banks and utility companies make billions a year. And instead of thinking outside the box for solutions what do we do. We argue with each other about how if your poor you shouldnt have children while they are laughing at us