The 50/30/20 rule
Popularized by Elizabeth Warren's All Your Worth, the rule splits after-tax income into three buckets:
- 50% needs — the non-negotiables: housing, groceries, transport, utilities, minimum debt payments, insurance
- 30% wants — everything optional that makes life good: eating out, streaming, hobbies, vacations
- 20% savings — emergency fund first, then retirement, investing, and extra debt repayment
Make it work for you
- High-cost city? Needs may run 60%+. That's the rule talking — it means wants or savings must flex, or income must grow.
- Automate the 20%: set a transfer to savings the day pay lands. You can't spend money you never see.
- Debt counts as a "need" minimum, extra debt payoff counts as savings.
- Review monthly. The rule's power is the visibility, not the exact percentages.