The 50/30/20 Rule: A Better Way to Budget

The 50/30/20 Rule: A Better Way to Budget

If your monthly expenses got you scared, pause and think: how do the best characters always survive in horror movies? They make a plan! Budgeting is a great way to plan your monthly expenses, live within your means, and rest a little easier knowing you’ve got the month covered, no matter what horrors may lurk around the corner.

Whether you like to write out your budget every month on worksheet, use a budgeting app, or keep a spreadsheet on your computer or phone (all totally great ways to keep a budget), a good rule of thumb is the 50/30/20 Rule.

Ugh, we know! Math is the worst. So here’s a helpful break down:

Let’s say you make around $3,000 per month after taxes, or around $36,000 for the year.

If you set aside 50% of your monthly wages, it equals $1,500 for Necessities.
Setting aside 30% equals $900 for Wants.
And the last 20% means $600 to set aside for Savings and Debt Repayment.

But what expenses fit into each of those categories? We’re so glad you asked. The most important are Necessities and Savings/Debt Payment, so let’s break down those first.


Here are 6 expenses you can include in your Necessities Budget every month. Keep in mind that the 50% you allot to your Necessities needs to cover ALL of these expenses every month.

1. Rent or Mortgage

For most folks, this is their biggest monthly expense. Whether you rent, have a mortgage, or live with family, you probably need to include this cost into your budget. Unless you scored the deal of the century, housing can be pretty expensive these days. Be careful to not let your rent or mortgage eat up your entire Necessities budget for the month.

2. Food & Groceries

This is a great place to take better control of your spending. While eating out and ordering in are fun, convenient, and hopefully delicious, they can also be expensive. Let’s move those to the Wants category and focus on how we can get the best bang for our buck at the grocery store. Name brands? Pssh, who needs ‘em. Free grocery membership cards that get you discounts on your favorite items? Yes, please!

3. Transportation

Whether it’s work, school, or the grocery store, getting where you need to go is always a priority when it comes to budgeting. Owning a car or taking rideshares may be more convenient, but public transportation is definitely the cheapest option. Getting a monthly pass for a bus or train can be significantly cheaper than gas, car insurance, tolls, and maintenance. Regardless of whether you own a car or take public transportation, this is still probably a major monthly expense.

4. Utilities

It takes a lot to make your house a home: electricity, gas, water, garbage pickup, internet service, phone plans, etc. Budgeting for these utilities each month can be difficult, especially since most of them change season by season. Take a look at your bills over the last year to get a better snapshot of how much you spend each month, then you can better calculate how much you need to budget for each expense. Regardless, it’s always good practice to turn your heat lower at night in the winter, or to turn your AC to a lower setting to reduce energy usage in the summer. Is someone in your house taking really long, really hot showers? Set a time limit and stick to it!

5. Healthcare

This is always a tough one to imagine budgeting for, but that’s what makes it so necessary. Do you have health insurance? Monthly prescriptions? Need to visit the dentist or eye doctor? How much do those tally up to each month? If you don’t have health insurance, are you setting a portion of your Necessities Budget aside to pay for any emergencies? We know, what a bummer. But unexpected healthcare costs can be majorly expensive, so it’s always a good idea to have money set aside every month, even just for better peace of mind.

6. Childcare

This expense obviously only applies if you’re taking care of children, but if you are, you know how expensive it can get. School expenses, afterschool care, daycare, babysitting, the list goes on. Child support is no joke and never an afterthought in your day-to-day planning, which is why it always needs to be factored into your monthly budgeting.

Savings & Paying Back Debt

These 3 savings goals should go into your Savings & Paying Back Debit Budget every month. Again, remember that the 20% you allot to this budget needs to be spread across all three goals.

1. Growing your savings

It’s always a good time to save. Retirement may seem like a lifetime away, but saving for it can start right now. Okay, so maybe retirement feels too far away, but saving for any kind of goal, emergency, or major expense is never a bad idea. And with GO2bank Savings Vaults1, you can earn 4.50% APY1, which will help build your savings up more and more each quarter.

2. Paying down student loans and/or credit card debt

The best way to stay out of debt is to stay out of debt. Oof, we know, that stings. But it’s a hard truth of budgeting. It might sound nonsensical, but what it really means is setting aside enough money every month so you can make your minimum loan payments and credit card payments on time each billing cycle. Some of those debts might feel like an impossible mountain to climb, but think of your Savings Budget as a lifeline that keeps you safe from slipping.

3. Building an emergency fund

Emergencies happen. A flat tire on your car, a leak in your bathroom, a sprained ankle and a trip to the doctor. But having to pay money you don’t have on top of the emergency just adds insult to injury. When you set aside a portion of your monthly income to an emergency fund, you’re setting yourself to be more prepared for whatever life may throw at you.


Ah, our favorite category. Sure, you don’t need these expenses to survive the month, but you certainly want them. Dining out, a trip to the movies, a weekend getaway, that new pair of sneakers. Whether it’s a hobby that brings you joy, some comfort food at your favorite dinner spot, or a trip for the whole family, it’s a lot easier to get there when you set a certain amount of money aside for it each month. Budgeting doesn’t mean all business all the time. It means making space in your finances for what you find most important.

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