How (and Why) to 50/30/20 Your Money

By Ellevest Team

Some people get a little obsessed with planning and tracking every penny they spend. Hey, if you like spreadsheets, you do you. For the rest of us, all you really need for a healthy relationship with your money is a solid, high-level framework for where it should all be going. And that’s where the 50/30/20 rule for your money comes in.

How (and Why) to 50-30-20 Your Money

First things first: It’s not actually a rule-that-must-never-be-broken. Instead, it’s a guideline — or, if you’re dealing with debt, a general direction. Under this approach, you’re trying to divvy up your take-home pay into three buckets:

  • 50% goes to needs. This includes bills, groceries, transportation, housing, minimum debt payments, work clothes, and other things that you have to pay for.

  • 30% goes to wants. You don’t need rooftop margaritas, Netflix accounts (no, really), or trips to Milos … but fun’s important.

  • 20% goes to Future You. Three things in this bucket: debt payments above the minimums, saving, and investing.

Some costs might overfill your “needs” bucket. If you’re carrying debt, have kids, and/or are dealing with life, “needs” might be the biggest — or only — bucket for a while. If you live in a city like NYC or San Francisco, rent might turn “50% to needs” into more like “60% to needs.” And some costs will fall into the gray area between two categories. (You might consider your gym membership as crucial to life. Others will toss it in the “wants” bucket.)

The idea is to do what you can to keep costs under control, and do what you can to work up to 20% for Future You. Because waiting to fill it can cost you.


© 2018 Ellevest, Inc. All Rights Reserved.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

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Ellevest Team

The Ellevest team is working to help women reach their financial and professional goals.