The 50/30/20 Budget Rule and How to Use It.

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The 50/30/20 budgeting rule is a method that helps you manage your money by organizing it into three categories: needs, wants, and savings goals. Learn more about how you can apply this budgeting strategy to your finances, and how it can help you manage your expenses and savings.

A family sits at a computer planning out their 50/30/20 budget with Huntington Bank.

Whether you’re a budgeting pro or new to organizing your money, it’s a good idea to periodically evaluate your finances and see if a new strategy can help you improve your finances. If you’re looking for a place to start, the 50/30/20 budget rule may be an option to consider.

Budget Breakdown by Percentage

The 50/30/20 rule is a way to break down your income into three specific percentages by allocating 50% to necessities, 30% to non-essential items, and 20% to savings and/or paying down debt. This budgeting technique can help you visualize your spending and saving categories, while keeping you on track with your finances.

For example, you may decide you’d like to put 10% of your income into a savings account. If your income is $1,200 per week, your goal would be to save $480 per month or at least $120 per week. Setting a concrete goal can help hold you accountable and encourage you to continue achieving financial milestones over time.

A possible downside of budgeting by percentages is that your income might not always stretch far enough to help you meet your savings goals. If you had an expensive car repair and can’t afford to save 10% of your income in savings for the month, it can feel like a major setback.

However, budgeting by percentages like with the 50/30/20 rule is only a guideline for your savings and not a strict plan. Use these percentages as a starting point and adjust your goals and expectations based on your individual financial needs.

Track Your Budget and Adjust Accordingly

If you’re interested in breaking down your budget based on percentages like the 50/30/20 rule, it’s important to start with a good understanding of your income and budget plan overall. Keep track of your income, spending, and savings to make a monthly budget for you and your family. Even if you find that the 50/30/20 rule isn’t for you, keeping a well-organized budget can be an invaluable way to keep your finances in order and help you meet your savings goals.

Whether you like using spreadsheets, notebooks, or online calculators, find a budget tracking method that works for you and keep it up to date. If you’re a Huntington customer, you can take advantage of Spend Analysis to help you track how much you're spending, and exactly where you're spending it, in categories like groceries and entertainment. Then you can analyze your finances, easily see where your money is going, and set savings goals with digital tools like Savings Goal Getter, which allows you to create up to 10 savings goals, plus an emergency fund.

How to Make Your Budget Using the 50/30/20 Rule

Making a budgeting plan using the 50/30/20 rule doesn’t have to be an exact science. If your finances don’t fit perfectly into the guidelines, you can customize your budget and tailor the rule to your needs.

To organize your budget using the 50/30/20 rule, try to organize your income in the following way:

50% of Income to Needs

Typically, “needs” would represent monthly expenses that are everyday necessities such as household bills and food. Needs take up the largest percentage of your income because these expenses are essential to keeping you and your family housed, fed, and comfortable.

“Needs” in your budget may include:

  • Rent or Mortgage Payments
  • Bills & Utilities (electricity, gas, water, phone, etc.)
  • Food & Fuel (groceries, gasoline, etc.)
  • Debt Payments (student loans, credit cards, etc.)
  • Medical Expenses (prescriptions, dental/eye care, doctor visits, etc.)
  • Childcare (daycare, babysitters, etc.)

If your income was $3,000 per month, you would set aside at least $1,500 for needs according to the 50/30/20 rule. Keep in mind, this rule only works if you currently live within your means, which means your household bills do not exceed the 50% recommendation of this rule.

30% of Income to Wants

The “wants” category of your budget includes any non-essential expenses that do not constitute a “need.” These are optional expenses that you can include in your budget only if you can afford them without sacrificing funds allocated for necessities.

“Wants” in your budget may include:

  • Entertainment (streaming services, video games, etc.)
  • Outings (date night, day trips, family vacations, etc.)
  • Hobbies (crafting, fishing, dancing, etc.)
  • Pets (adoption fees, food, toys, vet bills, etc.)
  • Clothing (new wardrobe, splurging on luxury items, etc.)

If your income was $3,000 per month, you would set aside $900 for wants according to the 50/30/20 rule.

20% of Income to Savings and Financial Goals

For savings and financial goals, evaluate your leftover income to consider how you can achieve your long-term goals. Do you want to own a house instead of renting an apartment? Are you interested in early retirement? Do you need a college fund for your children? Financial goals can differ greatly from person-to-person, so no two savings plans may look the same.

“Savings and Financial Goals” in your budget may include:

  • Paying Off Debt (student loans, credit cards, etc.)
  • Buying a Home (down payment, insurance & inspection fees, etc.)
  • Retirement Plan (401K, IRA, etc.)
  • Emergency Fund
  • College Savings
  • General Savings

If your income was $3,000 per month, you would set aside $600 for savings and goals according to the 50/30/20 rule. Looking to start saving towards your financial goals today? Open a savings account with Huntington.

Open a Huntington Savings Account

Savings accounts are great for setting aside cash for big purchases, like buying a house, or for emergency rainy day funds. You can set up scheduled transfers from your Huntington checking account to your savings account which can help you reach your savings goals even faster.
Learn More

Other Savings Rules and Budgeting Methods

Of course, the 50/30/20 rule isn’t the only way to budget your income or plan your savings. Your family’s financial needs may exceed the percentages laid out in the 50/30/20 rule and that’s perfectly fine. You may find that adjusting the percentages to 70/20/10 fits your income and budget better. Or, maybe combining categories is more helpful for your budget like with the 80/20 rule. In that case, 80% of your income goes to needs and wants while 20% goes to savings.

While the 50/30/20 rule can help you organize your money, everyone’s finances are different and there’s not one right way to build your budget. Any number of variables from promotions and pay raises to layoffs and unexpected emergencies can affect your ability to maintain a budget. Stay positive about your financial future and try not to sweat the setbacks. Huntington is here to help answer your questions about budgeting, savings, and more.

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