50/30/20 Budget Calculator

The 50/30/20 rule is a simple budgeting framework popularised by US Senator Elizabeth Warren in her book All Your Worth. It divides your after-tax income into three categories, making budgeting approachable for people who find detailed expense tracking overwhelming.

The first 50% covers needs — the essential costs you can't easily avoid: housing, utilities, groceries, insurance, transport to work, and the minimum payments on any debts. The next 30% is for wants — the lifestyle spending that makes life enjoyable but isn't strictly necessary: dining out, streaming subscriptions, hobbies, travel, and shopping. The final 20% goes to savings and debt repayment: building an emergency fund, investing for retirement, and making extra payments above the minimums on loans or credit cards.

The rule's power is in its simplicity. Instead of agonising over dozens of line items, you only need to keep three numbers roughly on track. It also bakes in a healthy 20% savings habit, which is higher than many people manage by default, and it gives explicit permission to spend 30% on enjoyment — a feature that makes the budget sustainable rather than punishing.

A crucial detail: the percentages apply to take-home pay, not gross salary, because tax and pension contributions are already removed before the money reaches you. The framework is a guideline, not a straitjacket. In high-cost cities, needs can easily exceed 50% of income, which simply means trimming wants or boosting income rather than abandoning the plan. People aggressively paying off debt or pursuing early retirement often flip the ratios toward saving. Use the 50/30/20 split as a clear starting point, then tune the categories to your own goals and circumstances.