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


Ask 100 people how they budget their money, and you’re sure to get 100 different answers. Truth is, there is no method that works for everyone. But there are some guidelines that can help make the process easier, particularly if you’re the type who can’t be bothered to keep track of how much you spend across 20 different categories. (Does the idea of tracking how much you spend on toothpaste versus protein bars sound appealing? Us neither.)

The 50/20/30 method is one guideline to consider if you want to go the simpler route because it splits everything into three main categories:

1. Essential Costs: 50%

These are costs like rent, mortgage payments, utilities, car payments, public transportation or groceries — anything that covers your basics. Think of it this way — if you need to pay for it in order to live or work, then it’s an essential. Also included: The minimum payments you need to make on any credit cards or loans. With this method, you would aim to spend no more than 50% of your take-home pay in this category.

2. Financial Goals: 20%

This is the part of your budget that is really about helping you secure your financial foundation. It includes what you put toward emergency savings, retirement and other future goals, like a home down payment fund. It also includes extra money you put toward debt, like credit card payments that go beyond the minimum or extra student loan payments. With this method, you would put at least 20% of your take-home pay toward your financial goals — think of it as paying your future self.

3. Lifestyle Costs: 30%

Finally, you would budget no more than 30% of your take-home pay toward those costs that are really wants versus needs. That could include eating out, shopping, concert tickets and other variable costs (like those fabulous new shoes you’ve had your eye on).

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. Here’s an example of how this could play out in the real world. Here’s a hypothetical budget for Stacey, 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)

Essential 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

Lifestyle Costs: $675, which is 30% of her take-home pay

Because Stacey 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.

A Few Things to Keep in Mind …

As you might have noticed, the 50/20/30 guideline uses your take-home pay as the baseline for your budget. Any contributions you make to retirement before your paycheck hits your bank account are not included, so 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!)

Also, 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.

The 50/20/30 guideline can serve as a useful benchmark, especially if you’re just starting to budget and want to know how to divvy up your paycheck. But when it comes down to it, how you spend (and save) your money depends on your specific goals and lifestyle.

  • SoCal jones

    Unrealistic. Where’s property taxes? Supplemental taxes? HOA fees? Mello Roos? Is that part of mortgage? $1200 for mortgage and property taxes are not feasible in southern California. That would mean $800-900 for mortgage for this example. That would barely cover rent here in an undesirable neighborhood. Even a cost of living adjustment would not work.

  • bill

    Best financial advice I have ever seen on the web.

    • EnjoyingTheView

      I suppose these unrealistic presumptions make “perfect sense” when you make PLENTY of money and never have ANY problem paying your bills! But, for the rest of us who are barely getting by, this useless “advice” is nothing but a patronizing insult! This person has never in their entire life, ever had to decide which bill to pay and which bill to ignore so that their family can have something to eat!

  • JJJ

    Are you nuts?! These examples are worthless…..student loans are typically much more than that, especially grad school or other advanced training. Not to mention, utilities…$75…$150?! Where, when?! Electricity, heat/ac, gas, oil, or wood, cell/phone bill, internet, garbage, water/sewer, car/health insurance, groceries….where could I possibly go that total utilities would be that little?? $1200 mortgage, unrealistic in many places. Not everyone has the funding or connections available to up and move to wherever mortgage/rent payments are so cheap. Rent, utilities, along with debt (student loans, etc) eat up all of our income and then some…you can only budget with what you have. You can’t even rent the American dream anymore. :

  • Vince C.

    $70 or$150r utilties? Mine are about $68 for water, garbage,sewer (the minimum), $50 for electric,$50 for natural gas, $38 for land line phone, and $78 for extended basic cable. No internet no cell phone no home security system, etc.

  • Sean

    It is interesting that this site is taking credit for coming up with the 50/30/20 rule when it was really devised by professors Elizabeth Warren and Amelia Tyagi in their book “All Your Worth: The Ultimate Money Plan” published a few years ago…

  • Beachn4fun

    health insurance is not listed because we all expect someone else to pay for it. Even the writer of this short essay. Cost on average, min. of 800 dollars per month for a family of four and should be listed as part of essential expenses.

  • Haarold

    Ha! Ha! Ha! 50% eh? How about 100% for essentials minus the $13 “extra”!

  • Hungry Jack

    I’m just wondering how skinny the family of 4 with 2 teenagers is when they only spend $400 / month on food. That’s only $25 / week each! Budgets are easy in a magical world.

    • camwiest

      I agree, that is pretty low. They could probably eat well on $600 though.

  • Pascal10

    I can’t believe these numbers are realistic. I live in a dump in Delaware for $740 a month….are there really livable apartments in Chicago for $750 a month??? In northern Delaware if you want your rent to be under $700 a month you need to sleep with a gun under your pillow. I can’t believe that Chicago isn’t a lot more expensive.

  • Andrew

    I eat ONE MEAL PER DAY plus antacids when I’m going hungry and get some heartburn. That’s 30 meals. Each meal is approximately $10 (pretty modest meals too), probably spend $20/month on TUMS and/or Pepto. Thus, my food expense even in this circumstance is, depending on the number of days in the month, $300-$330.

  • G

    $150 for utilities? This is usually 1 utility bill (electric) and there is still gas and water to pay for….and what about a cell phone/Internet? this article is a little off-base on what “real-world” expenses really cost…

    • camwiest

      Perhaps you should evaluate your bills. We paid $16 for gas, $30 for electric, $40 for internet and $54 for water/garbage/recycling. $140 for the month of June

      • jennyct

        $120 minimum for all refuse collection per year, and utilities based on the size of your home.

  • Realist9787

    Childcare might be listed as a Lifestyle Choice because it is (well it should be) a choice to have children or not. I know that sometimes it doesn’t happen that way. But one thing that is very clear to me from the comments here is that most people can’t afford to take care of themselves, never mind children!

    I agree the numbers in the examples are not realistic. But as many of you have tried to apply them to your situation, you find it impossible. Most of us did not learn how to budget when we were growing up, either from our parents or from school. And I would bet that most people don’t sit down and crunch numbers before deciding to have a child. I’m not saying people don’t have the right to have children, but many can’t afford them.

    • jennyct

      So you think having children should be relegated to the most successful people?

  • greeniemiss

    As a single working mother, I would hardly call childcare a “voluntary and fun” lifestyle choice.

  • Carol Wilson

    Ha! Ha! Ha! Try living on Social Security. I get 1010.00 a month and 50% goes for Rent. Utilities 65, No student loan, Can’t buy a car when mine was stolen(only Tex low cost insurance because car was 1989). Now eliminated insurance and cost of car when I was spending 35 dollars on oil because some idiot welded the oil pan instead of putting a new one on. I ride buses and heard about their accidents. I pay 24 dollars on travelers insurance for my grown children to get rich ething happens to me on vehicles,trains,buses, and planes. So how’s your budget. Try to save for last trip to Calif, then buy a dog to protect me from possums that come every year under my ramp/porch and try eating imbetween checks. Since the Navy won’t give me the Pension and Purple Heart after 50 years when Vietnam was going on, I don’t live very well because of them. So how’s your budget? Original Check from Social Security after taking care of Husband(dieing from alcohol and smoking? 525 a mo to live on in 2003. That’s the raise on my social Security. Because Boys and Girls, our Govnment doesn’t give you his SS because I was on Disability when he died. If your on that, they make you wait until(Me)Im 66 which I did. Ended up on Food Stamps and the tightest budget you ever saw. Served in the Navy in Personel taking care of 25000 guys records and getting men’s files and getting Meningitis. Now Im in a wheelchair with old age osteoarthritis and a disintegrating spine.

    • jennyct

      The dirty little secret is that retirement is tough, even if you do have money. I was in the physical therapists office today and it’s shocking to see how the body deteriorates by the time you’re 60.
      Don’t give up…

      • Carol Wilson

        That’s true.. I haven’t tried for many years therapy but you know the VA never would admit that the meningitis was on the Base in San Diego,Ca. I’ve been in Texas over 50 yrs with a trip to have my last daughter in San Diego,Ca. Everyone were Texans but me so I had to have her there. My tail bone was affected by the meningitis so the Doctor I had told me her head was stuck thereby a C birth. She was the last. My back was tolerable through the years, but in my 60′s, it’s intolerable. I do enjoy my laptop and I want one last trip to Disneyland before the big 70. All the VA has done for me is give me large bottles of very strong Tylenol but not T-3. Some kind of Ben-Gay made by an off brand and believe it works great. I sleep very well. Now in my after 65, the pain is so much more and if I lay in bed, it’s worse. I could have had my pension this week but 3 Big Wigs in the Military looked at my records and refused once again to give it to me. LIFE would be a little tolerabe if I had gotten it. I have Osteo arthritis now too. I suppose if GOD wants me to have it; HE will arrange it. I will have to trust in him. God Bless all of you. Make good decisions the best you can and TRUST IN GOD. A whole lot of Men got the same Desease and now live quite well. Discrimination???? I don’t know!!!!!!!!!!!

        • jennyct

          I’m sorry to hear that. I am thinking of going for my master’s (PA) because I don’t trust some doctors. At least I’ll have some access to healthcare ;). Be careful of the Tylenol, it’s hard on the liver. If you can do your own research, take the time (university access to pub med). See if they’ll cover counseling with a specialist that handles chronic health issues. Good luck.

    • guacal

      May God bless you!!

      • Carol Wilson

        Thank you. May God bless you too. America’s a Great place to be born in. We’re all Bless’d by God in so many ways. If this Ebola is curable, we are the one’s who will be truly be bless’d in more than saving our lives. I love my country. Isn’t it great that WE, the collective majority can complain and not get shot or killed for what we have on our minds??? God Bless you too……..

  • Derp

    Molly’s numbers are a joke. 25% covers ALL her tax liabilities, 401k, healthcare, dental and/or flexible spending account contributions? Nope. Not a chance.

    $36k is the 15% bracket. If she makes $36,250 that goes up to 25%. The state of IL also takes 5%. On top of that I’m pretty sure Chicago has a city income tax, as most major cities do.

    $75 for utilities? I don’t know anyone that pays just $75 for heat and electricity per month. Maybe in a really mild climate, but we’re talking Chicago. Scorching in the summer, freezing in the winter. No way. And how would she communicate with the outside world? Smoke signals? $75 isn’t paying for heat and lights AND a phone. Internet is close to that alone. Same with a cellphone.

  • dizzy

    OMG! The budget above does not even come close to “typical” everyday living. What about health insurance, life insurance, homeowners/renter’s insurance, HOA expenses? Utilities at $150 for a typical home? Gas or oil is 2X per month than $150 not including electric (I live in the Northeast) — $150 doesn’t even cover this let alone basic cable & telephone!!! Nice bottle of wine of dinner? It would be nice to go out to eat to a nice place w/my hubby once in a while — we did not purchase a house on 2 salaries;we only used his salary as a guide but even though we are both working, we have childcare costs, the cost of gas to-from work PLUS tolls and things for the 1 child which are REQUIRED school costs — OMG; NOT EVEN CLOSE!!!

  • john hinge

    Very out of touch article

  • Kurt

    I know this will sound extreme but I have been thinking about this myself for a while. Not so much about percentages but living lean. I have read some great articles just by googling living on 1,000 a mo. People could buy a trailer on wheels for 10,000 and own it. Pay some retiree 250 to 300 mo to park it in their driveway or backyard, in a safe desirable area. If you depreciate the trailer over 5 years it would be half the cost of rent. Smaller place equals smaller utilites. Share the internet with your landlord. Most people can’t afford a car, when the total expense is calculated it can cost .50 to 1.00 a mile. Live close to work, get a bus pass or take the subway. Buy a bicycle or walk. Buy everything second hand that has sales tax use ebay or thrift stores and save 70-80 percent. Get a Costco membership and sample food and beverages for free. Treat yourself once and a while to some free samples of the good stuff at Whole Foods. If there is a great movie out, wait 3 months till it is at redbox and rent it for 1.30, even better if you can watch it with a friend, then its only .65 each. Save your money, so if you ever want to buy something, pay for it in cash.

  • Kurt

    Consider leaving the U.S. and live even cheaper. Do your research, lots of ex pats living in Mexico, Panama City, Medellin, Chiang Mai.

  • Account Name Here

    Forgot to mention 10% tithe. 10/40/20/30

  • Mr Archie Bunker






  • Jim B in Boise

    What no 10% for tithing? I find that paying an honest tithe to my church helps me live within the 90% that is left much better. It helps in keeping desires in check, knowing that God is on my side in my financial battles, and it brings increased spirituality that helps limit desires, appetites, and passions for consumer itch items. Put God first and all else will fall into place, ignore God and you will be ruled by consumerism.

    • EnjoyingTheView

      Interesting. I guess it cannot hurt to bribe God, right?!
      Why is God so greedy, again? I forget.

  • Suzanne Elizabeth

    #s allocated in the article are so inaccurate compared to the actual cost of where I live

  • unskinator

    These calculations are made by someone who has money to spare. Some of these writers need to get living pay check to the next. They have no glue what living hard life is all about. For someone making 36000 per year and not counting in living expenses and croceries etc its just off the wall.

  • ew0054

    It takes discipline. One needs to be willing to change the lifestyle to fit the budget. If you can only spend $500 in a category, too many people justify spending $520 “just this once” with credit cards and get into trouble. I’ve been there, too. It’s a hard habit to break, but once I stopped blaming the economy, my boss, than bankers, el Presidente and everyone else for my financial problems, life got a whole lot better.

  • seans

    135$ including phone and internet? How is that even remotely close to anyone’s utilities? My internet and phone alone are over 150$. Sure I could dial (hehe) back my phone to roughly 40$ and my internet to maybe 50$, which leaves 45$ for water, trash, gas and electric?? LOL

  • lito zerimar

    Your a genius but what about your food?

  • mwall

    What a joke. Food and Gas are flexible expenses? Netflix is Fixed cost?

    • JeffDeWitt

      Food is flexible.. are you eating Spam and beans or steak and asparagus? As the article explained Netflix is fixed cost because it costs the same every month.

  • Tim_Sims

    As some one who lives near Chicago, I’m curious how “Molly” manages to rent for only $775 per month within driving range of the city. I guess she has roommates, because nothing else makes much sense.

  • RC

    these financial planners are living in dreamland. The % they give for “taxes and 401k contribution” will be lucky if it covers income taxexs (state, federal, and auto tax). Be real

  • RC

    and they totally left out health insurance, which costs much

  • Kyle

    To all the people who felt the need to complain:

    There is no blanket budget for everyone. This is a general budget scheme for those who can’t seem to figure it out and need basic introduction. Yes, people encounter many problems, and therefore this plan simply may not apply to them very well. If you have been following it, it may have helped you address the problems you encountered to some extent. It may have fallen far short, depending on the situation. I doubt the author intended to solve every single person’s budgetary problems in a few paragraphs using a very basic budgeting system. She specifically mentions that it is very flexible given the situation.

    So please, before nitpicking whether or not health insurance is a tax, or berating her for not using your gas mileage in an example, simply use your brain. Understand that this is meant as a tool for you to develop your own budget, not for her to solve all of your problems using some “secret budget to cure all debts”. This site is designed to help you create a personal budget. Personal. Meaning individual. Meaning designed to accommodate your own goals and expenses. If you really need help, then instead of turning to the comment board full of people looking to whine about their lives, try taking advantage of their free consultation. Maybe they can shed some light, maybe they can’t, but at least you would be taking some sort of action other than making a useless, well, more detrimental than useless, comment about nothing in particular.

  • Mr.MoneyBags

    Answer.. Make more money. Problems solved.

    • EnjoyingTheView

      I agree! THAT is about the one and ONLY thing this article actually demonstrates!
      If you DO NOT already make enough money to implement this arbitrary “budget”, then you are simply screwed! Too bad.

  • Mr.MoneyBags

    Also these Tax rates are rediculously low.. 25%? 30%? try more like 37-40% including 401k +Tax. Unless they are only saving 2% in 401k..

  • kia slim

    Do you need a loan? Have you been looking for where to get a loan? Have you been trying to get any kind of loan? then apply now at ?( if you want to get an affordable loan. Loan is offered here at a very low interest rate of 3%. Contact us now if you are interested.

  • Liz Norris

    find budget not to real

  • Wizbang_FL

    This program would only work if you haven’t already established things like car payments, mortgages, and assume that you have smooth sailing for the past 15 years. However, most people end up needing learn how to go thru a “life change” an a website / investment program won’t change established habits. Many of the numbers assume the individuals found those rates for utilities, costs for food, etc. Which I can get. But the lack of any form of identified protection (insurance) life, health, home/renters ins. Particularly homeowners insurance is a substantial amount for many. It may be a good idea. But looking at the website it has all the indications of a startup doing a fly-by.

  • Sandy Hofstra

    What about food?

  • Just call me Joe

    That is somewhat backwards. 20% to retirement, they got that right. Then 30% to savings and other investments. Household expenses (mortgage, utilities, insurance, maintenance) should be no more than 20%. The other 30% for everything else, including car and vacations.

    The idea of the 30% to savings is to collect enough to make investments. Choose investments to create ongoing income, then that income gets added to your spending. Good investments have underlying utility beyond finance, such as rental houses and farms. Direct investment into businesses can be good too, if you can find a good partner and don’t over-do it.

    I know several people who started at the bottom and became millionaires, the most common way is to start a business (also very risky), but some did it by putting 50% of their income into retirement, savings, and investments.

  • Slay

    you’ll probably never retire and maintain life style unless you’re saving 50-60% of your take home or more.

    background: BA Economics, 10 years work experience in real estate finance, trading and investment management..

    • aniket_md

      I agree. We are dual income and save an entire paycheck (about 40% of total take home pay) every month. As my salary increases, I expect to save that difference too raising the percentage saving even more. In 30 years, we expect to retire.

  • peteolcott

    How do you budget $1000 total income per month?

  • Mike

    Sarah & Tim’s utilities should look more like:
    $300 Electric
    $75 Phone
    $100 Cell Phone
    $75 Internet
    $30 Waste Pick-Up
    $100 Water & Sewage
    $680 Total

    • aniket_md

      This is nonsense. My utilities are more like these:
      $70 electric
      $0 phone
      $40 high speed Internet
      $65 HOA fees (that includes snow removal, waste pickup)
      $25 water and sewage
      $10 international calls
      $40 gas
      $250 total

      I have a family of 3. And the water surcharge is pretty high in my county. .

  • A.A. West

    Research has show that allocation of income to household expenses within the American micro-economy is based surprisingly on demographics. People from Wisconsin, Iowa, Vermont, and New Hampshire spend majority on investments, then housing, and then living expenses, while people residing Compton, Harlem, Atlanta, allocate their limited income to child support, legal fees, paying off debt, financing automobiles while living with their mom, and lastly baking soda.

  • Alex

    You people forget this is a basic guide. She is by no means giving you the hard figures to punch into Excel or their own program-they say this multiple times. It’s a rough edge guide no a solid blueprint. And it’s a good rough edge guide that’s helpful and realistic. They can’t make this fit your individual need by a simple post.

  • tz

    My electricity alone is $160 a month in an apartment. $115 for all utilities is a bargain.

    • aniket_md

      My electricity bill for a 3 story townhouse is $80 during the peak of the summer and $40 otherwise. My gas bill during the peak of the winter is about $75.

      You need to turn down the AC, get some fans and maybe wear a sweater in winter.

    • JeffDeWitt

      Look at how you are using that electricity. Could you turn some lights off? Turn the heat down or the AC up? Use less hot water, don’t run the dishwasher and washer/dryer unless they are full… there are a lot of things you can do even in an apartment.

  • Brian Bennett

    Health insurance is a choice, not a necessity.

    • EnjoyingTheView

      I suppose you could say the same thing about life and death in general, right? Other people’s Life is “optional” to self-centered folks such as yourself!

      • Brian Bennett

        I don’t know what you would suppose, especially when you don’t know me at all. Life is necessary; health insurance is not….All insurance life, homeowners, vehicle and health are optional.

      • Brian Bennett

        Look in your mirror to see someone who is self-centered. You know nothing about me, thank God, but your previous response reveals immaturity and lack of understanding. You can “suppose about life and death, in general,” all you want. What is worth noting is that many people who claim they cannot afford health care, seem to be able to afford cell phones, cable TV, and other discretionary items. Health insurance, like auto insurance, life insurance and mortgage insurance IS a choice. Before you respond with something like, ” auto and mortgage insurance may be required,” realize that having a car and/ or home IS A CHOICE, not an entitlement.

    • Missouri

      If you note, they say take home pay which is post your share of corporate part paid insurance. A bit of a sleight of hand and not applying to all. Food is mandatory but flexible and some that is true for medical. It can go from 500 for a family of four that does not use much to 55 depending on what you choose and how much you use and your state. Supposedly families of four that can eat on 250 per mo but most spend more.

      We spend less than they say but kids are grown and I know once we hit retirement medical is going to shoot way up. I will put it in mandatory and savings is not going to be 20 but more like 10.

      • Brian Bennett

        What is worth noting is that many people who claim they cannot afford health care, seem to be able to afford cell phones, cable TV, and other discretionary items. Health insurance, like auto insurance, life insurance and mortgage insurance IS a choice. Before you respond with something like, ” auto and mortgage insurance may be required,” realize that having a car and/ or home IS A CHOICE, not an entitlement.

  • Pete K

    Obviously this is not a cookie cutter solution for everyone. It is a guideline. If you can’t get within the parameters, fine. But try. I am over 50% with my fixed, that doesn’t mean I scrap the whole thing. That means I plan adn manage my finances until I get to within 50%.
    And go complain about Obamacare adn the rest someplace else. YThis is a personal finance column…..not the complaint department. Your endless nitpicking and bitching ruins the entire purpose of the post.

  • Bob R

    Sarah & Tim, a family with $2000 mortgage has $275 utility costs including phone, TV & internet? Where do you live Sarah & Tim because I want to move there. I pay on average $500 / month electric, $100 / month natural gas, $400 phones for family, $225 cable & internet, $125 / month water bill. Total $1350 for “utilities”. I do not believe anyone with a house worth as much as it would be worth having a $2000 mortgage (that is a minimum of a $200K to $300K home), can have utilities including phone, tv, and internet cost only $275 per month. No way. Triple that if you skimp and have a highly energy efficient home. I think the person who wrote this made it up – and is completely out of touch with what utilities cost in the real world.

  • Sharri

    I do also find it interesting that insurance was not part of the equation. Where I am, insurance expenses take a big chunk out of my paycheck. Now, I do get that take home means take home. But I think it should be something that is considered for future scenarios. Because after taxes, 401K, and insurance, my 60K annual income take home amount is almost the same as your scenario with the Molly, who makes 36K a year. It can be a very large part of the salary, especially if you are supplying the insurance for the family.

  • unskinator

    On the “poorest” one of the lot there is no mention of car payments, and groceries, insurance? These stories are usually written by someone who has no idea what living from paycheck to the next is.