Finance, Get Out of Debt, Save Money

50/30/20 Budget Explained

The first step toward being a more financial conscious person is really knowing where your money does. What’s the best way to do this? A budget of course! Budgeting is one of the best things you can do to save money and I think the 50/30/20 budget could be the one for you!

Do you ever find yourself wondering how much of your income you should be spending on a certain item in your budget? Where exactly does that item fall in the grand scheme of financial freedom? I know it can all get pretty complicated, and the 50/30/20 budget can really take some of the guesswork out of it for you. 

The 50/30/20 budgeting method explained


So, what exactly is the 50/30/20 budget?

The 50/30/20 budget divides your monthly income into 3 separate categories. These three categories have different percentages of your income associated with them that should be given to different parts of your finances.

The budget essentially just tells you how much money you should be putting towards your expenses, choices, and priorities. Don’t worry, we’ll dig into each of the categories as well as a good example of how it works in action later! 

Why should you use the 50/30/20 budget?

Most people don’t have the slightest idea where their money goes each month. They turn things they don’t actually need into “essentials” and manage to justify all the money they don’t need to spend. The majority of people who are in serious debt have never even tried to follow a budget, and they could easily get closer to debt free if they focused on something like the 50/30/20 budget! 

Before you start budgeting, you need to know what your bigger purpose is. What are you trying to work towards? The only way to continue to stay motivated to reach your financial goals is to focus on your why.

What could your motivator be? 

You could be trying to get out of debt, save for a house, pay for your kid’s college, or just save for a vacation. If you have a serious goal in mind the budget will go so much smoother.

Just remember, that without a goal your budget will fail. 

So, what are the three categories?

50% Essential Expenses

This budgeting technique puts 50% of your monthly income straight towards the things you can’t live without. What are the essentials in your life? 

Your 50% essentials include your mortgage/rent, your utilities and other household bills, your food, and your transportation. 

Many people will try and sneak their phone bill into this category, but the truth is, your phone is a choice. People lived without them for hundreds of years. 

These things are all necessary for you to stay alive. You need a roof over your head that has running water/electricity, you need food, and you need to get to work/school. 

30% Personal Choices

This category is where you get to have some fun money! The fun category, woo! Any money you spend that isn’t considered an essential expense is going to go into this category.

Any money from this 30% that doesn’t get spent by the end of the month gets transferred into the 20% category to help you reach your financial goals. The money shouldn’t roll over to the next month because then you’re not going to get anywhere. 

So, what kinds of things are in the personal choices section? Your cell phone bill, cable/Netflix, your hobbies, clothing eating out, and alcohol. 

20% Financial Priorities

This category is where your financial goals really come into play. What are your goals?

Are you trying to finish off your student loans this year? Are you trying to retire with a million dollars in the bank? Whatever your goals are, this is where you get to work toward them. 

You can further divide this 20% into different sections to work towards different goals. You could quickly pay off all your debt with the 20%, then start putting 5% towards a couple different categories.

This section is the most important in the 50/30/20 budgeting method because it’s where you’re going to start really making progress!

Let’s do an example of how this could work! 

So, Serena and Dan are a 30-year old couple with a combined total monthly income of $5,000 after taxes. This means their percentages will look like this:

50% = $2,500

30% = $1,500

20% = $1,000

Let’s dig a little deeper into each of the 3 categories. 


50% Essential Expenses ($2,500)

Serena and Dan have a home where their mortgage is $1,250 and their average monthly utilities are around $250 so that leaves $1,500 for food and transportation.

Serena’s car is paid off but Dan pays $200 a month for his. This leaves $400 for gas between the two of them because their monthly food budget for groceries is $400. 

1250 + 250 + 200 + 400 + 400 = $2,500 


30% Personal Choices ($1,500)

Altogether their phone bills come to $200 a month ($100 each) and they pay $100 for Netflix and cable. Dan plays in a house soccer league and Serena goes to a weekly paint class which brings their hobby expenses to $200.

They budget $200 for two nice date night dinners a month and $200 for other entertainment like movies and concerts. This leaves a variable amount of $600 to go toward birthday presents, family get-togethers and other things that aren’t consistent each month and the rest gets rolled over into the financial priorities category.

200 + 100 + 200 + 200 + 200 + 600 = $1,500 


20% Financial Priorities 

Dan and Serena have a little bit of student loan debt left and paying $500 a month will have them done by the end of the year and they’re happy with that. So they pay that $500, put $200 into their emergency fund and the other part of the 20% goes to retirement.

Any money that rolls over from the 30% goes straight into their retirement fund because they would love to retire earlier than 65. 


The 50/30/20 budget method can really work for your if you make it happen. Here's everything you need to know about it to budget for your future


Final Thoughts 

One of my favourite quotes is “failure to plan is planning to fail” and it applies so heavily to budgeting. If you make a plan for your money it makes it so much easier for you to succeed.

This plan can work if you focus on your financial goals! Make a plan based exactly on what you want. You got this.

If you try out the 50/30/20 budget or have used it in the past, let me know what you think in the comments down below.


Hey! My name is Taylor O’Halloran and I’m a huge fan of saving money any way I can.I’m obsessed with dogs and I love all kinds of cheese even though my stomach hates it.  I’m a recent university graduate who just wanted to do her own thing and see what happens! Follow me on the journey!

Taylor O'Halloran

Hey! My name is Taylor O'Halloran and I'm a huge fan of saving money any way I can.I'm obsessed with dogs and I love all kinds of cheese even though my stomach hates it.  I'm a recent university graduate who just wanted to do her own thing and see what happens! Follow me on the journey!

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