50/30/20 Rule: A Simple Budgeting Technique


A budget is a good idea for every household. Every month we look at our bank account and wonder where our entire paycheck went. 

If we can write out a realistic budget and stick to it, we might find ways to cut back and have additional money each month. Budgeting is an excellent way to see exactly where our paycheck goes each month.

What Is the 50/30/20 Rule?


The 50/30/20 rule is a simple budgeting framework that divides after-tax income into three major categories; 50% for essentials, 20% for savings and debt payments, and 30% for everything else, sometimes called your needs, wants, and savings.

Following this rule has helped many be able to save money at the end of each month. But this is a rule of thumb guideline, and circumstances will differ for each person.

Where Did the 50/30/20 Rule Come From?


The 50/30/20 budgeting rule was popularized by Senator Elizabeth Warren when she was a law professor at Harvard. She coined the phrase 50/20/30 when she and her daughter, Amelia Warren Tyagi, wrote a book titled “All Your Worth: The Ultimate Lifetime Money Plan.”

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