How it works
The 50/30/20 rule splits your take-home pay into three parts. It was made popular by Elizabeth Warren and Amelia Warren Tyagi in their book All Your Worth.
needs = 50% of take-home pay
wants = 30% of take-home pay
savings = 20% of take-home payThe calculator adds up each bucket and divides by your take-home pay. Money you have not given to any line counts towards your savings rate, because you have not spent it:
savings rate = (take-home pay - needs - wants) / take-home payA worked example
You take home 3,800 a month. The rule gives 1,900 for needs, 1,140 for wants and 760 for savings. With the example lines above, needs come to 1,850 (48.7%), wants to 1,140 (30.0%) and savings to 810 (21.3%). Every amount has a job, so the savings rate is (3,800 - 1,850 - 1,140) / 3,800 = 810 / 3,800, about 21.3%. If you delete a line and leave the money unassigned, it still counts as saved, but only if it really stays unspent.
Using the result
- Minimum debt payments are needs. Anything you pay above the minimum is savings.
- Divide yearly bills, such as insurance or a car service, by 12 and add them as monthly needs.
- If needs take more than half, protect the savings line first and look at the largest fixed costs. In expensive cities, 60/20/20 can be a more honest target.
- Give every unassigned amount a job. Money with no plan tends to get spent.
Read the full guide to the 50/30/20 rule, then see what your savings rate means for your timeline with the savings rate calculator.