Glossary · Couples finance
50/30/20 Rule
/ˈfɪf.ti ˈθɜːr.ti ˈtwen.ti ruːl/ · noun
Definition
A simple budget allocation: 50% of after-tax income to needs, 30% to wants, 20% to savings or debt.
The 50/30/20 rule was popularized by US Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their book All Your Worth. Needs (rent, utilities, groceries, minimum debt payments, transit) get 50%. Wants (dining, entertainment, hobbies) get 30%. Savings or extra debt payment get 20%.
For couples, the rule is applied to the combined after-tax income. It works well for stable dual-income couples; it breaks in very high cost-of-living areas or for couples saving aggressively for a near-term goal.
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