Monthly 50/30/20 Budget Calculator

How the 50/30/20 budget calculator works

Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment.

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Tell me more: What is the 50/30/20 rule?

The 50/30/20 rule is a popular budgeting method that splits your monthly income among three main categories. Before slicing up your income using this budgeting framework, it’s important to calculate your after-tax income.

How to calculate your monthly after-tax income

Your monthly take-home income is also known as your net income. To arrive at your net income, take your gross pay and subtract taxes. It's likely you'll have additional payroll deductions for things such as health insurance, 401(k) contributions or other automatic payments taken from your salary. Don't subtract those from your gross (before tax) income. If you've lumped them in with your taxes, you'll want to separate them out — subtract only taxes from your gross income.

The simplest way to calculate your net income might be to use a take-home pay calculator. You can also try checking your pay stub, as it often includes both your gross and net pay.

50% of your income: needs

Necessities are the expenses you can’t avoid. This portion of your budget should cover required costs such as:

• Housing.

• Food.

• Transportation.

• Basic utilities.

• Insurance.

• Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment bucket.

• Child care or other expenses that need to be covered so you can work.

30% of your income: wants

Distinguishing between needs and wants isn’t always easy and can vary from one budget to another. Generally, though, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:

• Monthly subscriptions.

• Travel.

• Entertainment.

• Meals out.

20% of your income: savings and debt

Savings is the amount you sock away to prepare for the future. Devote this chunk of your budget to paying down debt and creating a financial cushion.

How, exactly, to use this part of your budget depends on your situation, but it will likely include:

• Starting and growing an emergency fund.

• Saving for retirement through a 401(k) and perhaps an individual retirement account.

• Paying off debt, beginning with high-interest accounts such as credit cards.

The percentages in the 50/30/20 rule can be changed to fit your financial circumstances. If saving or paying down debt is a priority, for example, it’s OK to shrink your wants bucket and increase the savings and debt bucket. If the 50/30/20 rule doesn’t work for you, there are other budgeting systems you can explore.

Get more help with monthly budget planning

For more budgeting advice, including how to prioritize your savings and debt repayment, review our tips for how to build a budget and use our financial calculators. Once you have a solid budget in place, consult our personal finance guide to learn more about how to manage your money.