How to Use the 50/30/20 Budget Rule, Plus Free Templates

See how the 50/30/20 budget rule helps you spend smarter each month, plus free templates for Google Sheets and Excel

What is the 50/30/20 Budget Rule?

The 50/30/20 budget rule is a fast way to see how much you can afford to spend and save each month.

Simply divide your monthly post-tax income into three categories:

  • 50% to NEEDS: rent/mortgage, groceries, bills, transportation.
  • 30% to WANTS: entertainment, certain subscriptions, fun stuff!
  • 20% to FREEDOM: eliminating debt and building savings

This approach provides room for flexibility in spending while ensuring consistent savings, leading to financial security and achieving long-term financial goals.

For example, if you earn $50,000 per year after taxes, you have:

  • $25,000/year or $2083/month for needs
  • $15,000/year or $1250/month for wants
  • $10,000/year or $833 to pay off debt or save for retirement and emergencies.

“Budgeting forces us to face the reality of how we spend. It allows us the opportunity to see the gap between what we say is important to us and how we spend our money.”

– Carl Richards

See how fast you can eliminate debt and/or build your emergency fund

Financial Snapshot Spreadsheet
50/30/20 Budget Snapshot for Google Sheets

Besides providing spending guidelines, the 50/30/20 budget rule can help you set realistic debt payoff goals. It can also help you build your emergency fund, which is essential for financial security.

Prioritizing funding your 20% “Freedom” category with automated payments while and avoiding overspending can help you reach these powerful financial goals.

Assuming you apply your entire 20% savings allocation to one big goal at a time, the 50/30/20 budget shows you:

  • How long it would take to fully fund an emergency account with the recommended three months salary
  • How long it would take to eliminate all your credit card debt.
  • How long it would take to fully pay off all outstanding loans, including student loans and mortgages.

Of course, real life rarely cooperates with simple guidelines.

The 50/30/20 budget won’t work for everyone. In the real world, you need to prioritize wants and needs.

So you might decide to save a more but also carry debt a bit longer. Or you might decide it’s worth it to spend more than 50% on living expenses.

Hopefully, the snapshot provides a view of what’s possible.

Free 50/30/20 Budget Calculators

The following spreadsheet templates use simple formulas to calculate your custom 50/30/20 budget snapshot. They also provide a very rough estimate of your net worth.

Here are two simple 50/30/20 spreadsheet templates:

Tiller Money

Tiller Money

Your financial life in a spreadsheet, automatically updated each day.

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