The 50 30 20 rule: Instructions & Calculator - Boss Of My Money

The 50 30 20 rule: Instructions & Calculator

Categorised as Money Management
50 30 20 budgeting rule

The 50/30/20 rule is an effective and simple way of managing money efficiently. Your take-home income after tax is divided into three spending categories: 50% for needs, 30% for wants, and 20% for savings and debt payments.

Budgeting is essential to your financial health, and that’s why the 50/30/20 budget rule is a great starting point.

The term “budgeting” can sound restrictive and complicated, but that could not be further from the truth.

Keeping your expenditures evenly distributed over these three major spending areas will help you achieve your financial objectives.

It will also help you avoid the tedious task of going through a lot of details that other budgeting methods require.

By the end of this article, you will better understand the 50/30/20 rule and be prepared to create your own using our free 50/30/20 Excel Spreadsheet, using or calculator at the bottom of this page.

Your Ultimate lifetime money plan

Before you dive into using the free 50/30/20 rule budget calculator tool we have provided, let’s remind ourselves of the importance of budgeting.

A budget is an ultimate lifetime money plan to ensure well-balanced financial health.

You can’t do personal finance without having a budget plan. And you can’t achieve your financial goals without a budget.

When creating a budget, the rule of thumb is to be realistic about your spending and deliberate about how you spend your money by allocating your funds appropriately.

This is where the 50/30/20 budgeting method comes in.

Why the 50/30/20 Rule of thumb generally works?

Getting your finances right can sometimes be tricky. The 50/20/20 rule principle works well for many reasons besides its simplicity.

If you like spending money on wants, then his budget rule is ideal for you.

This budget rule also considers savings and debt repayment and prioritises living expenses after your take-home pay.

With this type of budget, your financial goals are sure to be met.

What is the 50/30/20 rule?

What is the 50/30/20 budget rule?

Spend 50% on your needs.

50% of your income after taxes is needed to cover all your necessary expenses.

The percentage may be high, but it makes sense when you look at all the big-ticket items that fall within the 50% budget category.

According to the 50/30/20 rule, you should have no more or less than 50% allocated towards your needs each month.

If your essential needs are over 50% you can adjust your spending to reduce your expenses.

It can even be as simple as switching energy suppliers or trying new ways to save money on groceries.

50 percent needs budgeting category

The 50% line of expenses may vary between individuals. Use the following list as a guide to determine what items would fall into the 50 percent needs and living expense category:

  • Rent, mortgage repayments, or housing costs
  • FoodInternet (working from home)Taxes levied by the local government
  • Expenses for utility bills (gas, electricity, water, internet)Contracts (cell phones, landlines, and internet service providers)Transportation to and from work
  • Child care and child maintenance are two terms that are used interchangeably.
  • Making the bare minimum payments on debts
  • Fines/charges
  • Life insurance, critical illness, health insurance, income protection, and all insurance premiums
  • Car payments (hire purchase, lease, insurance, MOT, road tax, parking, etc.)Minimum debt payment
  • Student loans


It’s important to remember that your essential expenses may differ from those listed above, which is perfectly fine. Only you have the authority to determine what is essential and what isn’t.

Spend 30% on wants

If you have 50% after-tax earnings that will pay for your basic needs, 30% will pay for your wants.

According to the 50/30/20 rule, a want is an expense that is good to have but not essential to have.

What you want to spend money on but do not need.

Using this example, if you earned £2000 a month, your monthly want budget would be £600 a month.

And in a situation where you spend too much money on your needs, you might think about reducing your expenditures to allow you to have more for your wants.

30 percent wants budgeting category

Your “wants” category would include expenses for things you enjoy doing but aren’t necessary for your survival. Anything that is not a primary requirement can be classified as non-essential. For example:

  • Eating out, restaurants, and movie nights out
  • Subscription services such as Netflix, streaming subscriptions, gym memberships
  • Entertainment
  • Health and beauty are intertwined.
  • Bags, clothing, and accessories of the highest quality
  • Gadgets of high quality, the latest electronics
  • Vacations and excursions
  • Fun money
  • Sports tickets


It is very easy to become obsessed with your wants, leading to overspending and ignoring important financial goals.

Remember the last time you justified a purchase you wanted to make, and despite that still small voice in your head telling you not to do it, you went ahead and made the purchase?

Ironically, the 50/20/30 budget calculator is ideal for spenders because it allows for guilt-free spending within a budget.

You can also extend the size of your want category not by increasing the percentage but by shopping smart.

You can shop around for bargains, purchase second-hand items, and sell things you no longer require to fund the purchase of new or expensive items.

Stash 20% of your monthly income for savings and debt repayment

Next, after your monthly after-tax income, 20% of your monthly earnings should go towards achieving your savings and investment objectives or/and repaying your outstanding debts.

Consider this your “go forward” category. This type of expense should not be taken care of until your necessities have been taken care of.

In line with the 50/30/20 rule, while minimal payments toward your debts are accounted for in the needs category, any extra payment to reduce your debt or future interest rates will come from the 20% category.

Consistently leaving 20% of your salary for a year may help improve your financial future.

This is true if the end goal is creating a personal savings plan or even preparing for a mortgage.

20 percent savings and debt repayment budgeting category

Here are some examples of items that you might consider including in the 20 percent group of the 50/30/20 rule:

  • Make additional payments toward your credit card debt
  • Debt payments
  • Emergency fund, unexpected expenses, and rainy day fund
  • Short, medium and long-term savings goals
  • Sinking fund bank account
  • Health insurance
  • Putting money aside for retirement
  • Holidays
  • Buying a new car
  • Down payment or deposit for your first home
  • Begin a family of your own.

The easiest way is by simply calculating your net pay income after tax.

This includes any retirement income. Generally, freelancers will get a monthly income that includes business expenses and any taxes they pay.

The 50/30/20 rule is easier for the 9-5 employee who gets regular monthly after-tax income. Business owners can still benefit from this budget method.

However, they may need to create a baseline income to cover the dips in revenue.

If you receive automatic deductions for benefits such as health care insurance or a pension fund, then there is no need to add them again to your budget as they are already paid for before take-home tax.

Step 2: Categorise your spending

You must see the exact amounts you’ve made in the last few months to determine how much you earned.

Take your bank statements or simply use them to analyse your expenses.

All your transactions can be classified into categories, including salaries, food & grocery store, entertainment & entertainment, etc.

Now divide everything into 3 categories: need, want, and save. Remember, a need is an essential expenditure which cannot go unrecognized.

A want can be a luxury you can’t afford, like dining out. To figure out your allocation, download our free 50/20/30 rule budget calculator, which you can find below.

Step 3: Evaluate and adjust your spending to match the 50/30/20 rule

You will see a percentage in the 50/30/20 monthly budget calculator to meet your needs, wants, and savings.

When you have limited income, deciding what you want to cut will help you make up for its shortfall.

The less you spend on things you don’t want, the higher your chances of meeting your 20% savings and debt goal and keeping your needs at 50%.

Is Using 30 Percent Of My Income on Wants Wise?

Personally, my only complaint about the 50/30/20 rule is that I feel like 30% towards wants is a bit much for anyone. Especially when you can save and invest that money instead of spending it.

So, If you have debts, or have no or little emergency fund savings you may want to look closely at how much you are allocating towards wants.

To pay off debts (especially high-interest debts) and build short-term savings as quickly as possible, and make extra payments towards retirement plans, consider reducing your want allocation.

Remember that the percentage allocation is not set in stone, and you have the flexibility to change it and put extra money towards debts and savings.

How Do I Adjust The 50/30/20 Rule If I Have A Large Amount Of Debt And No Savings?

Those with high-interest debts and little or no savings can reduce their want allocation to 20% and allocate the extra payments to their debts and savings categories.

As a result, you can achieve financial independence sooner while also increasing your total savings at the same time.

Even though it violates the 50/30/20 rule of thumb, this method may be more appropriate for someone willing to make sacrifices to become debt-free and save money more quickly.

What types of debt repayment should be considered in the 20% of savings and debt?

According to the 50/30/20 rule, minimum payments towards credit cards, overdrafts, mortgage payments, and loans count towards 50% of the needs category.

Generally, any additional credit, loans, or mortgage payment is considered 20% of the needs category.

You could also allocate funds towards emergency savings, retirement savings, or other financial goals you may have.

What Should I Do If My Expenses Exceed 50% Of My Earnings?

While the whole point of the 50/30/20 rule of budgeting is that your needs must equal at least 50% of your income, it is possible to make some changes if you discover that your essential cost of living consumes more than 50% of your gross income.

The best way to overcome this is to increase your net income or decrease your monthly expenses.

Here Are Simple Ways to Decrease Your Monthly Expenses when using the 50/30/20 rule:

  • You can begin by reviewing your budget and attempting to reduce your essential bills by 50%
  • Downsizing
  • Changing your energy service providers
  • Keeping your basic groceries budget under control
  • Consider getting rid of your car if you can go without one

If setting aside 50 percent of your income for your needs continues to be unrealistic, you may want to consider another budgeting type, such as zero-based budgeting or the 80/20 rule.

Keep reading below to find further examples of alternative budgeting method to the 50/30/20 rule.

This allows you to divide your needs and wants into 80 percent for savings and debts and 20 percent for savings and debts.

50/30/20 rule spreadsheet: Download our free Budget Calculator

Excel, Google Sheets, and Apple Numbers provide pre-made worksheet templates for making spreadsheet budgeting easy.

We have made it super easy for you to get started immediately with your 50/30/20 budget. Download our free 50/20/30 rule budget calculator.

50-30-20-Budget-Calculator-Boss-Of-My-Money Download

50 30 20 budget rule calculator excel spreadsheet

Is the 50/30/20 rule right for you?

While many budgeting methods are available, the 50/30/20 rule is generally an effective but simple solution to begin your budget journey.

The right budgeting method for you will be influenced by your personal financial situation and overall financial objectives.

Having three categories can allow you to refine your finances and not have trouble organising every single expense and tracking every penny.

Just be aware that just because you create a budget does not mean you will stick with it. Some may have difficulty trying to improve their spending habits.

Let us help you identify spending habits holding you back and offer you solutions to be consistent and stick with your budget in our 2-hour budget planning session.

In 2-hours, we will whip up a budget that reflects your needs, wants, and savings objectives.

Other concerns with the 50/30/20 rule could be related to money allocation for needs, savings, or debt. That being said, you could always allocate additional money towards your desired category.

The 50/30/20 rule Calculator Is Right For You If You Are…

The 50/30/20 Calculator Is Right For You If You Are…
  • Not sure where to begin when it comes to budgeting.
  • Looking for an easy way to budget your monthly income.
  • If you get a steady paycheck each month.
  • Planning to achieve your financial goals using a simple budgeting technique and time-efficientPaying down debt while also building up your long-term savings over time.
  • Want to make sure that your bills are paid on time.
  • Desiring a generous portion of your earnings to spend on your desires without feeling guilty

Finding the right budgeting method that works for you

There are a variety of popular methods of budgeting to choose from other than the 50/30/20 rule. Y

ou may have tried a budgeting app, budgeting spreadsheets, or the traditional pen and paper method.

If you are new to budgeting, the thought of budgeting and not knowing which budget method will work best for you can be overwhelming.

Nevertheless, the key to finding a budgeting method that works for you is to experiment with a few different options.

Stick with the one that keeps you motivated and helps you achieve your desired goal of saving, becoming debt-free or spending without feeling guilty.

If you would prefer a shortcut to this, you may want to see a certified financial planner who can help you create a budget you love in just 2 hours.

The 50/30/20 rule of thumb vs. other budgeting methods

The 50/30/20 rule of thumb vs. other budgeting methods

The 50/30/20 rule budget is great for beginners.

With only three major categories and much simpler to execute, that being said, you may want to try other types of budgets to find the one that works for you.

You see, there is no one-size-fits-all in personal finance.

The rule of thumb is that your living expenses should always be less than your take-home pay.

Here are examples of other budgeting methods you may want to explore if the 50/30/20 rule does not work for you.

  • Calendar budgeting
  • Cash envelope budget method
  • Reverse budgeting.
  • Budgeting apps such as Monzo

It’s A Wrap for the 50/30/20 budget method breakdown

Managing your finances, saving and paying off liabilities, only works when you have a solid budget that works. This will give you the confidence to tackle overspending.

Now that you know the basics of how t create a budget focused on the 50/20/20 rule, you can get started right away by downloading our free 50/20/20 budget calculator below.

All you need to do is to insert your income total after-tax.

You can also save it to your computer for future reference. If you are really struggling with creating a budget plan that works for you, why not schedule a 2hr 1:1 budget planning session with Esther, our financial coach and budgeting expert at Boss of My Money.

Our two-hour budgeting session helps clients gain clarity about their budgets.

Together, you will establish your top 3 money goals, create a plan to build your emergency funds, pay down existing debt, and create a budget that will support you in achieving them without sacrificing on the fun stuff.