How to calculate a 50/30/20 budget

Enter your monthly after-tax income, and our 50/30/20 budget calculator will divide your monthly income into needs, wants and savings based on the 50/30/20 budget rule.

The 50/30/20 rule helps you spend what you can afford while allocating some money towards debts or savings.

The 50/30/20 budget rule

For example, if your monthly take-home pay is $2,000, you would spend $1,000 a month on necessities, $600 a month on wants and $400 a month on savings and debt repayment.

Start by saving 20% of your income and spend 80% on things you need and want, like rent or hobbies. You can be flexible with your budget and adjust the proportions depending on your situation.

What is the 50/30/20 rule?

The 50/30/20 rule is a budgeting strategy made popular by US Senator Elizabeth Warren and Amelia Warren Tyagi in their book, All Your Worth: The Ultimate Lifetime Money Plan.

You split your after-tax income into 50% for needs, 30% for wants, and 20% for savings or debt repayments.

50% goes to needs: these are the necessities you must pay for, such as:

  • Rent or mortgage payments
  • Groceries
  • Healthcare
  • Transportation
  • Bills and utilities
  • Child care
  • Insurance
  • Minimum debt repayments (e.g. credit card bill)
The the 50/30/20 rule budgets 50% for needs; expenses you need to pay from every paycheque before anything else.

30% goes to wants: non-essential spending, such as:

  • Eating out and takeout
  • Entertainment (e.g. movies and sports tickets)
  • Going out with friends
  • Subscriptions
  • Shopping
Wants are things you spend for enjoyment.

20% goes to savings and debt repayment: try to build an emergency fund and save for retirement through tax advantage accounts such as a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA).

50-30-20: 20% towards saving money or clearing your debts.

You may also have short-term savings goals that should be included in this category. You should also pay off high-interest debt such as credit cards.

Use our guide on how to save money to reduce your monthly spend,ng and check out our guide on how to get out of debt if you need help to reduce your monthly repayments.