Breaking Down the 50/30/20 Budgeting Method

What is the best method of budgeting? How should I budget? Let’s dive in!

When it comes to budgeting, the term personal finance applies heavily. Every situation is different and you have to find what works for you! There are dozens of different budgeting methods, I would encourage you to try different ones until you find something that is both effective and easy to use!

This is one of my all time favorite easy to use budgeting methods! The 50/30/20 budget is one of the best beginner methods as it is extremely easy to understand and the math is far from complicated. So what does each section represent?

beginner budgeting methods

An excellent breakdown of the 50/30/20 budgeting method from @firewithafamily on Instagram!

50% of Your Income

With this budgeting method, 50% of your income goes to things that you need to live. Anything that is a requirement to keep you and your family moving forward falls here.

An important note, distinguishing between needs and wants is not always easy. Something like Netflix might feel like a need, but if we really think about it, it isn’t. Don’t get me wrong here, I have Netflix and I love it, we just can’t classify it in this section of the budget!

One way to put it into context – dark but helpful – if I lost my job tomorrow what are the things that I have no choice but to pay for? Those are the things that should account for 50% of your expenses with this budgeting method! Utilities, rent/mortgage, food, these are the things we simply need to operate every day.

30% of Your Income

Here we go, this is where our beloved Netflix, Spotify, etc. live! While this is not the largest category, I would argue that it is actually the most impactful as it controls our quality of life. Sure, the point could be made that the saving / investing portion (below) is the most important, but this 30% that we use for wants is what makes life worth living.

Learning to stretch this 30% across the entire month and maximize the value of every dollar here will keep this budgeting method from feeling restrictive.

Effectively stretching this portion to make this budget feel non-restrictive is easier said than done, but as is the case with all things, practice makes perfect!

20% of Your Income

The wealth creator, the income replacer, the place where big things happen! Investing / saving! This is where you can secure a healthy retirement, create generational wealth, and even possibly obtain financial independence.

One of the main questions I get about this kind of budget is around this number. What if I can set aside more than 20%?

Do it!

The purpose of this budget – all budgets really – is to prevent unintentional spending. I don’t just mean spending that occurs on accident here, I mean that we want to intentionally spend every dollar we bring in.

I got dinner out last Friday because ~ I planned for it ~ . I hear jokes all the time when I spend money on non-essential things. “Not FIRE approved”. “Do you really think you can retire early if you get food out or buy that new golf club”?

Without a doubt.

I plan for the purchases I make with a budget!

I personally follow a pay yourself first policy. The first thing I do when I get paid every other Friday is save (invest) a pre-determined portion of my salary. Whether this budget works for you and you set aside 20% of your income, or you follow something else, make that the first thing you do!

Additionally, I like to optimize my checking account cash flows (see this article) and any amount in my checking account at the end of the month that is over the threshold I need to maintain also gets invested!

This is all great, how do I set it up?

This is probably my answer to everything, but I find that spreadsheets work best! You can do the math yourself to see what 50%, 30%, and 20% of your income would be and manually allocate those portions to each expense, or you could have a spreadsheet do the math for you!

One more thing I would recommend you should consider, keep things realistic. If your needs take up 55% of your income, that is okay!

I would encourage you to take 5% out of the Wants (30%) category to make up the gap, but you shouldn’t give up on this budgeting method if your situation doesn’t perfectly fit! As I said in the beginning, every situation is different and we have to find what works for us!


A special shoutout to the Fire With A Family blog & Instagram page! The excellent graphic at the beginning of this post was created by Blake, you should absolutely check them out on Instagram (@FIREwithafamily) and at their website! This article is an excellent extension of the point I am hoping to get across here, it dives into how to go about setting a realistic budget!

In Summary

As with all budget plans, you need to find something that works for you! I love this method because of its simplicity – 50% on required expenses, 30% on wants, and 20% set aside to save / invest. Of course, if you feel like you are able to save more than 20%, do it!


As always, thank you so much for taking the time to read this! Please do not hesitate to reach out to me with any questions, comments, or suggestions for future content!

My contact information can be found here!

– RCG

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