Episode 74 - 50 / 30 / 20 Budgeting Rule Explained

Summary:

In this episode of Personal Finance Cat, we explore the popular and beginner-friendly 50/30/20 budgeting rule, a simple framework for managing your money without stress or spreadsheets. Originating from Elizabeth Warren’s book All Your Worth, the method divides your after-tax income into three categories: 50% for Needs (essentials like rent, groceries, and insurance), 30% for Wants (non-essentials like dining out and entertainment), and 20% for Savings and Debt Repayment (retirement, emergency funds, and paying off extra debt).

I explain how to apply this rule using a $4,000 monthly income as an example, showing how it breaks down into $2,000 for needs, $1,200 for wants, and $800 for savings and debt. You are encouraged to track your own spending and plug your numbers into this model for insight.

Final takeaway: While the 50/30/20 rule is a great starting point, personal finance should be tailored to individual goals. The key is spending with intention.