The 50/30/20 rule is a simple way to budget your money in a balanced way. The rule states that 50% of your income should go towards essentials like housing, food, and transportation. 30% should be allocated for discretionary items such as dining out, hobbies, and entertainment. The remaining 20% should be put towards financial goals like saving for retirement, paying off debt, or saving for a down payment on a home.

Following this rule helps ensure your basic needs are met, you have money for enjoyment, and you’re making progress on important financial goals. For many people, the 50/30/20 rule provides an easy framework to budget each month. However, you need to adjust the percentages based on your own unique situation and priorities. If you have high rent or debt payments, you may need to allocate more than 50% to essentials. If you want to pay off debt aggressively or save for a big purchase, increase the 20% portion.

The keys to making the 50/30/20 rule work are tracking your income and expenses, and developing a budget each month. Start by listing your monthly income from all sources like your job, side hustles, interest, etc. Then, allocate 50% of that total income to essential expenses. Determine what portion of the remaining 50% will go to discretionary items (around 30%) and your financial goals (around 20%). Hold yourself accountable by checking your actual spending against the budget each month and make adjustments as needed.

Over time, the percentages may shift as your income and expenses change. The point of the rule is to provide a straightforward framework to keep your budget balanced across different financial priorities. For many, the 50/30/20 rule is an easy tool to gain more awareness and control over their money. With some diligence and practice, it can help build the foundation for financial wellness and stability.