How to Balance Your Household Budget — The 50/30/20 Budget Rule

Updated: Oct 21

Let’s put one myth to bed right now — Budgeting isn’t easy, at least not at first, especially if you’re a busy bee who feels like she can’t add anything more to her plate.

Budgeting means sitting down and writing out a plan. It takes time and energy to accurately assess how much money you have and where it goes. If you’ve been flying by the seat of your pants — spending a little bit here and a little bit there and hoping everything will just sort itself out — the very thought of so much foresight and discipline can feel overwhelming.

But here’s the truth: Making a plan helps you make the most of your hard-earned savings.

Senator Elizabeth Warren shares her secrets to mastering finances in her book “All Your Worth: The Ultimate Lifetime Money Plan.” Warren maps out the 50/30/20 budget rule to help you manage your money, and save for emergencies and retirement. “The secret?” she writes. “It’s simple, really: get your money in balance.”

Divide up your after-tax income — and make a simple budget.

It’s as simple as:

  1. Spend 50% on your needs.

  2. Spend 30% on your wants.

  3. Put away 20% in savings.

Here’s an example:

Let’s imagine your family’s after-tax income is $65,000 — which is hovering just above the median household income in the United States. Here’s how you could apply the 50/30/20 budget rule:

Needs: $32.5K of after-tax income or $2,708 per month

Just the basics.

Rent or mortgage payments



Car payments


Health care

Minimum debt payment

Wants: $19.5K or $1,625 per month

These are all the things that aren’t essential — but make life enjoyable.


New clothes, shoes, jewelry, bags, beauty products, etc.

Gym memberships

HBO, Netflix, Prime subscriptions

Dinner and movies out

Toys and gifts


Savings: $13K or $1,083 per month

Allocate 20% of your after-tax income to savings and investments.

Add money to an emergency savings account — consider setting aside three months of living expenses or more.

Contribute to an IRA or 401(k).

Invest your money with a robo-advisor or financial advisors.

Debt repayment — while minimum payments are part of the "needs" category, any extra payments reduce the principal and future interest owed. Simply put, they count towards savings.

Having a plan and sticking with it allows you to cover your expenses and save for retirement — while still prioritizing the activities that make you happy. Plus it reduces financial stress. Ready to get started? Share your journey with your Hive.

Let’s get buzzing! Share your thoughts with the Hive.

Have you tried budgeting in the past? What worked? What didn’t?

How do you balance “needs” and “wants” in your life?


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