The Street Articles

  The 50/30/20 rule is a guideline for budget allocation to plan your spending to prepare you for the future and unforeseen circumstances. Your budget can be categorized into three simple buckets: Your necessities (50%) Your wants (30%) Your savings & investments (20%) Your Necessities 50% of your income goes to your needs. Your necessities are expenses which are important and can’t be avoided. Examples are housing, food, transportation, medication, utility bills. Whatever that you need to survive should be parked under this category.   Your Wants 30% of your income goes to your wants. Differentiating between necessities and wants isn’t always easy. Simply put, your wants are basically anything that you can live without. They can be the money you allocate for shopping, dining out, hobbies, gym subscription, or anything “extra” that is not essential to living. Hint: Your wants typically involve something that you do for fun. Your Savings & Investments The balance of 20% is for y