What's the 50/30/20 budget rule?

Q: What’s the 50/30/20 budget rule?

The 50/30/20 budget rule allocates your after-tax income as follows: 50% for needs (essential expenses), 30% for wants (non-essential spending), and 20% for savings and debt repayment. It's a simple framework that may need adjusting based on your specific circumstances.

The 50/30/20 budget rule is a simple budgeting framework that divides your after-tax income into three categories:

50% for Needs: Essential expenses like housing, food, utilities, transportation, minimum debt payments, and healthcare
30% for Wants: Non-essential expenses like dining out, entertainment, hobbies, subscriptions, and vacations
20% for Savings and Debt: Retirement contributions, emergency fund, investments, and extra debt payments beyond minimums

This rule provides a simple starting point for budgeting, but you may need to adjust the percentages based on your specific situation, especially if you live in a high-cost area or have significant debt to pay down.

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