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.
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.
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.”