Split your take-home pay using the 50/30/20 rule (50% needs, 30% wants, 20% savings and debt) and compare it with how you actually spend.
What is the 50/30/20 rule?
The 50/30/20 rule is a simple way to divide your after-tax income:
- 50% needs: costs you must pay, such as housing, utilities, groceries, insurance, transportation and minimum debt payments.
- 30% wants: things you choose, such as dining out, entertainment, travel, hobbies and upgrades.
- 20% savings and debt: emergency fund, retirement, investing and payments above the minimum on debt.
Worked example
With $5,000 of monthly take-home pay, the targets are $2,500 for needs, $1,500 for wants and $1,000 for savings.
If you actually spend $2,900 on needs (58%), $1,300 on wants (26%) and save $800 (16%), you are $400 over on needs and $200 short on savings. Because needs are hard to cut quickly, a realistic first step is moving $200 from wants to savings.
Is 50/30/20 realistic?
In high-cost areas, needs can easily take more than 50%. Treat the rule as a starting point. Variations such as 60/20/20 or 70/20/10 are common. What matters most is having a savings percentage you stick to.
Need or want?
A basic phone plan is a need; the newest phone is a want. Groceries are a need; restaurant meals are a want. The minimum debt payment is a need; anything extra counts toward the 20%.
Frequently asked questions
Does retirement saving through my paycheck count?
Yes. If it comes out before your take-home pay, you can add it to both income and savings for a complete picture.
Where do I start if I save nothing today?
Start with 5% and raise it every few months. Build a small emergency fund first.
Related tools
Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.