How to Create and Stick with a 50/30/20 Budget Plan

Managing your budget can be a daunting and overwhelming task. There can be so many expenses to consider, it can be hard to know where to start. That's why the 50/30/20 budget plan can be a good tool for budgeting success.

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The 50/30/20 budget is simple. Dog simple.

Managing your budget can be a daunting and overwhelming task. There can be so many expenses to consider, it can be hard to know where to start. That's why the 50/30/20 budget plan can be a good tool for budgeting success —especially if you need an easy-to-understand way to track your money and personal finances.

This budget allocates 50 percent of your income for necessities, 30 percent for wants, and 20 percent for savings and debt repayment. By following these parameters, you'll have an easier time managing your finances, setting goals, reducing debt faster, and ultimately reaching financial freedom much sooner than if you didn't budget at all.

In this article, we will discuss how to create a successful 50/30/20 budget plan that works best with your lifestyle as well as tips on how to stick with it over time.

Why Budget at All?

Budgeting is important to help you manage your money. It helps you save and make sure you have enough money for the things you need. Budgeting also helps you make sure that you don't spend too much or get into too much debt.

Setting Up a 50/30/20 Budget

The first step is to calculate your budget and break it down into necessities, wants, and savings.

Necessities are essential expenses such as housing, food, transportation costs, etc. Wants are discretionary expenditures like entertainment and vacations. Finally, the 20 percent that's left over should be allocated for both long-term savings goals as well as debt repayment.

Here are a few examples.


  • Housing,
  • Food,
  • Utilities,
  • Basic transportation costs,
  • Insurance premiums,
  • Basic clothing and personal care items,
  • Minimum loan payments. Larger payments go into the savings and debt repayment bucket.


  • Eating at restaurants,
  • Streaming video services,
  • All other forms of entertainment,
  • Luxury items or clothes,
  • Nice cars,Vacations and holidays.


  • Retirement funds or investments,
  • Emergency fund,
  • College savings,
  • Saving for a down payment.

Sticking to the Budget and Making Adjustments as Needed

Sticking to the budget is not always easy, but there are steps you can take to make it easier.

First, write down all your budget items and income information so that you have a clear picture of what's going on. Budgeting software will work here too. The key is to know how much money you have in each category —necessities, wants, and savings or repayment.

A household with an after-tax monthly income of $5,500 could allocate $2,750 to necessities, $1,650 to wants, and $1,100 to savings and debt repayment.

Second, automate savings and debt repayment so that these funds are taken out immediately after each paycheck. This will help ensure that you don't spend them first and forget about budgeting the rest of your money.

Third, keep track of your budget items and adjust as needed. If something unexpected happens or if you're not sticking to the budget, make adjustments accordingly to ensure that you can still reach your financial goals. One of our favorite adjustments at You, Money, Happiness is to kill entertainment spending.

Finally, be sure to reward yourself for budgeting success. You can add a date night each month, and remind yourself that going out is possible because of the great job you're doing with your budget. Also, start to think of yourself as someone who is responsible with money and sticks to a budget. This will help you stay motivated and keep budgeting even when it gets difficult.

Paying off Debt Faster with the 50/30/20 Budget Plan

If paying off debt is your ultimate goal, then the 50/30/20 budget plan can be very beneficial in helping you reach this goal.

Remember, that minimum loan or credit card payments come out of the necessities bucket. They are part of the 50 percent. The 20 percent of monthly income focus on savings and dept repayment should be used for making larger than minimum payments.

One helpful strategy is to take on the loan or credit card with the lowest balance first. So if you had three loans with balances of $1,000; $750; and $500 respectively, you should make minimum payments on all three, but then focus additional repayment on the loan with the $500 balance—the lowest balance.

Another strategy is to focus on the loan with the highest interest rate. In either case, you are paying over and above the minimum and you are focusing extra payments on a single loan or credit card balance.

Advantages of a 50/30/20 Budget Plan

Let's summarize a bit and review some of the advantages of this budget scheme. The 50/30/20 budget gives you easy-to-understand spending targets. You know how much of your monthly income should be spent on each category.

The plan is also flexible since you can choose to save more or pay off debt fast. And the plan leaves lots of money for wants.

Disadvantages of a 50/30/20 Budget Plan

The budget can be challenging if you have a low income or large debt payments. For example, if your necessities bucket takes more than 50 percent of your monthly income, this particular budget is doomed to fail.

In fact, that should be a strong indicator that you need more income. There is no shame in getting a second job or —better still— starting a side hustle.

Another potential disadvantage is how much this budget allocates to wants. For example, if you want to gamble and spend 30 percent of your monthly income betting, we would not be really happy with you. Furthermore, many people way overspend on entertainment. We always recommend not watching television or streaming services, you life will be much better without them.