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Making a budget (and actually sticking to it) is pretty standard financial advice for a reason — it works! But if you’re newer to budgeting, figuring out how much you can afford to spend on each category can get kinda tricky.


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In a nutshell, a budget should assign a job to every dollar you make. And contrary to popular belief, budgeting doesn’t have to mean deprivation! You can (and should) set money aside in your budget for things and experiences that make you happy, whether that’s buying donuts every Saturday or saving up for a post-pandemic trip.

If you’re not sure where to begin, the 50-30-20 could be a great jumping off point.

Person making a budget with a calculator, pad of paper, and laptop


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Though it’s called a “rule,” it’s really more of a guideline to help you figure out how much to spend on what. You can use it as a starting point for making your budget or adjust the numbers so it suits you. Just keep your needs and lifestyle in mind as you make your budget and do what makes the most sense for your situation.

Using this budgeting rule, you’ll divide your income into three categories: needs, wants, and goals. Here’s how to do it in 4 pretty simple steps:

circle divided into pie pieces labeled 50% needs, 30% wants, and 20% goals


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Step 1. Figure out how much take-home pay you’re earning every month.

spreadsheet showing income from full time work and side jobs


Kathy Hoang/BuzzFeed

Since this budgeting method is all about percentages, you’ll want to start by figuring out how much money you’re actually bringing home every month. Make sure you’re basing your budget off your after-tax income, so set aside money for taxes first if you’re a freelancer or self-employed. Looking at pre-tax totals could cause you to overspend.

If your income goes up and down every month, check what you earned over the last six months to a year and calculate the average. By budgeting around your average, when you have a high-earning month you’ll be able to stash more cash in your savings, giving yourself a nice buffer for the lower-earning months.

Step 2. Make a list of your expenses and divide them into needs, wants, and goals.

List of expenses divided into the categories needs, wants, and goals


Kathy Hoang/BuzzFeed

“Needs” are things you absolutely must spend money on in order to live, like your home, essential groceries, utility bills, and transportation to get to work.

“Wants” can include things like a gym membership, takeout, and streaming subscriptions. These things are nice to have, but you could live without them.

Finally, “goals” can include things like paying off debt, saving for retirement, and filling up your emergency fund.

Step 3. Divide your income into three buckets, putting 50% toward needs, 30% toward wants, and 20% toward your goals.

Circle broken up into 50% for needs, 30% for wants, and 20% for goals


Kathy Hoang/BuzzFeed

Let’s say you take home $3,000 a month. This gives you $1,500 for needs, $900 for wants, and $600 for goals.

Step 4. Add up your expenses in each category, check them against the totals for each bucket, and adjust the percentages if you need to.

Spreadsheet showing monthly expenses divided into the three categories with a 54-32-14 split


Kathy Hoang/BuzzFeed

When you look at your typical spending in each of these categories, you might realize that the 50-30-20 rule doesn’t exactly suit your needs. And that’s totally fine!

Let’s say you live in a city where the rent is *not* cheap, so you decide to split your income 60-20-20 so you have more money to cover your needs. Or maybe you’re laser-focused on paying down debt, so you decide to temporarily go with a more bare-bones budgeting approach, splitting your pay 50-10-40. As long as you’re always putting money toward your needs, wants, and goals, you can pretty much choose your own adventure.

You could also try a similar rule, like the 80-20 rule where you put 20% toward saving and goals first, then do whatever you want with the rest. There’s also the 70-20-10 rule, which puts 70% toward your living expenses, 20% to paying off debt, and 10% into savings. And like I said before, you can always make your own rules if none of these are right for you.

One great thing about the 50-30-20 rule is that it works with tons of different budgeting tools. Whether you use a budgeting app like Simplifi, plug your numbers into a spreadsheet, or write it out on some scratch paper, it’s a super easy framework to help you get started.

Have you figured out a budgeting system that works for you? Share how you make a budget (and your tricks for sticking to it) in the comments below!

And for more money tips and tricks, check out the rest of our personal finance posts.





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