50/30/20 Budget Calculator
50/30/20 Budget Calculator
Split your take-home pay into needs, wants and savings with the 50/30/20 rule — or with your own percentages, if your city’s rents make 50% for needs unrealistic.
50/30/20 budget
Take-home pay of $60,000 a month, split 50/30/20
The 50/30/20 split
- pay
- monthly take-home (after-tax) pay
- needs
- bills you must pay whatever happens, including the minimum on every loan
- savings
- investing, building an emergency fund, and paying debt down faster than the minimum
Worked example
Take-home pay of $60,000 a month, split 50/30/20
Needs = 50% × 60,000 = $30,000
Wants = 30% × 60,000 = $18,000
Savings = 20% × 60,000 = $12,000 a month, $1,44,000 a year
The 50/30/20 split at different take-home pay
| Take-home a month | Needs 50% | Wants 30% | Savings 20% |
|---|---|---|---|
| $30,000 | $15,000 | $9,000 | $6,000 |
| $60,000 | $30,000 | $18,000 | $12,000 |
| $1,00,000 | $50,000 | $30,000 | $20,000 |
| $2,00,000 | $1,00,000 | $60,000 | $40,000 |
Where the 50/30/20 rule comes from, and where it bends
The 50/30/20 rule comes from All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and her daughter Amelia Warren Tyagi, published in 2005. They called it the balanced money formula: spend no more than half of your take-home pay on must-haves, keep 30% for wants, and save at least 20%. The shares are of pay after tax, not of salary before it.
Must-haves, or needs, are the bills you would still have to pay if your income stopped next month: rent or the home loan EMI, groceries, electricity and water, the commute to work, insurance premiums, school fees, and the minimum payment on every loan and card. Wants are the rest of your spending — eating out, clothes beyond the basics, travel, streaming. Savings include investing for the future and building an emergency fund, and any debt you repay faster than you have to. The logic behind the split is that fixed costs are the hardest to cut when trouble comes, so keeping them to half your pay leaves room to cope.
The rule was written for American households, and it bends in practice. In expensive cities, rent alone can take a third of take-home pay or more, and the needs share is often larger than 50%. Families supporting parents, or paying school fees, may find the same. If so, change the percentages above; the page will show the amounts, and warn you if the three shares no longer add up to 100%. The useful part of the rule is less the exact numbers than the habit of deciding the savings share first. To turn the savings figure into a plan, use the emergency fund calculator, the savings goal calculator or the SIP calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
What is the 50/30/20 rule?
A budget split of take-home pay: up to 50% on needs, 30% on wants and at least 20% on savings. On $60,000 a month that is $30,000, $18,000 and $12,000.
Who created the 50/30/20 rule?
Elizabeth Warren and Amelia Warren Tyagi, in their 2005 book All Your Worth: The Ultimate Lifetime Money Plan, where they called it the balanced money formula.
Is the 50/30/20 rule based on gross or net income?
Net: take-home pay after tax. Using gross salary would make every share look larger than the money you actually have.
Do loan EMIs count as needs or savings?
The minimum payment you must make counts as a need. Anything you repay beyond it counts as savings, because it reduces debt faster.
What if my needs are more than 50%?
That is common in high-cost cities. Enter your own percentages; the rule’s point is to protect the savings share and to bring fixed costs down over time.
Related calculators
References
- Warren E, Warren Tyagi A. All Your Worth: The Ultimate Lifetime Money Plan. New York: Free Press, 2005 (paperback 2006). The “balanced money formula”: at most 50% of after-tax income on Must-Haves, 30% on Wants and at least 20% on Savings.
- Simon & Schuster. All Your Worth, publisher’s page: divide your money into “the Must-Haves (the bills you have to pay every month), the Wants (some fun money for right now), and your Savings (to build a better tomorrow).”