50 30 20 Rule of Budgeting (Excel Template Included)

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Learn the 50-30-20 Budgeting Rule and why it's a great method for those new to budgeting! Find out about some challenges you may face using this method and ways to overcome them!

Download our FREE Excel Budgeting Template for the 50 30 20 Method. The template was made for Excel but will work in Google Sheets or Numbers for mac users. For those using a program other than Excel, the columns may need to be shifted, but the formulas will all work!

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Who Should Use the 50/30/20 Rule?
The 50/30/20 Budgeting Method is best for those who wish to keep things simple. This budget can work well for college students, young professionals, and families alike.

It is a great introductory budgeting technique that gives guidance on how much to allocate toward different expenses throughout the month. If you’re brand new to budgeting or have tried a method too complicated for your tastes, this is the budget for you!

What we like about 50/30/20 Rule:

One of the simplest of all budgeting methods
Perfect for first-time budgeters.

The budget easily highlights if any changes need to be made
Some drawbacks of 50/30/20 Rule:

Possibly not aggressive enough budget for paying down debt or racking up savings
Those living in ultra-high rent areas may find the budget a bit challenging
Higher earners may want to lower their 30% Wants category

50/30/20 Rule Breakdown
A budget plan using the 50/30/20 Rule of thumb breaks down your expenses into three separate categories:

Let’s do a quick analysis of those categories.

50% Needs
Needs are expenses that are vital to living. They include expenses that you cannot avoid on a monthly basis.

Needs should include:

Housing, Groceries, Basic Clothing, Healthcare, Transportation, Childcare, Minimum Debt Repayments (i.e. Credit Cards, Student Loans, Car Loans)

30% Wants
Wants are considered extra expenses that are not needed in order to live and work on a monthly basis. They are usually expenses that add to your quality of life, but aren’t deemed completely necessary.

Wants may include, but are not limited to:

Internet Plan, Cell Phone Plan, Monthly Subscriptions (i.e. Netflix, Amazon Prime, Costco), Vacations, Luxury Items (i.e. Clothes, Shoes,Jewelry), Dining Out, Entertainment, Travel

Unfortunately, Wants are usually the starting place for budget problems!

20% Savings and Debt
The savings and debts category is meant for setting money aside for the future and paying off any loans or debts owed.

Savings and Debts may include:

401(k), Traditional IRA, Roth IRA, Emergency Fund, CDs, Money Markets, All Debts beyond Minimum Payments: Credit Card, Student Loans, Car Payments