How It Works
The 50/30/20 rule is a simple, practical rule of thumb for individuals who want a budget that’s easy and effective. It offers guidelines for enjoying your income while putting savings on autopilot.
Humans are fallible—sometimes we just need guidelines. If you struggle making sense of a sea of budgeting systems and apps, consider the 50/30/20 rule. Developed by Elizabeth Warren, a senior U.S. Senator from Massachusetts and expert in bankruptcy law, the 50/30/20 rule states that your after-tax income should be roughly divided three ways:
- 50% to needs
- 30% to wants
- 20% to long-term savings