The Viral “50/30/20 Rule” Budgeting Hack, Explained

Once you decide to start saving money it can feel like your entire social life goes out the window. Instead of meeting up with friends on a Friday night or splurging on a fun date, many budgets require you to stay in and count your pennies. That also means no takeout, no new clothes, and no fun events to look forward to on the horizon, like seeing Sabrina Carpenter in concert or going on vacation.

If you’re looking for a little more wiggle room in your budget, the 50/30/20 rule might be your jam. On TikTok, creator @sharontseung said this budgeting strategy requires you to put 50% of your income towards needs, like housing, food, utilities, and minimum payments on debts; 30% towards your wants, like shopping and dining out; and 20% towards your savings account, emergency fund, future goals, and investments.

According to Gloria Garcia Cisneros, CFP, a wealth manager with Lourd Murray, the 50/30/20 hack is a good rule to follow to save money over time while maintaining flexibility. “It works best for individuals with stable, predictable incomes, as this allows for consistent amounts going into each category each month,” she tells Bustle.

If you aren’t in a rush to reach a financial goal — or if you want to prioritize yourself right now — it might be worth trying. Here’s everything you need to know about this budgeting plan.

What To Know About The 50/30/20 Rule

Creating and sticking to a budget is one of the best first steps toward financial health, says Holly O’Neill, the president of retail banking at Bank of America. But what a budget looks like will be different for everyone. For some, having a budget might mean focusing on saving. For others, it might mean focusing on necessities.

The 50/30/20 plan considers these important factors, too, but leaves a good chunk left over. “This rule allows for flexibility because it sets aside a portion of your income for ‘wants,’” says O’Neill. “That way, you can still have fun while ensuring that your bills are paid on time and you’re saving for your future.”

Twenty percent isn’t a ton of money to stash in savings, but it’s not nothing. “Even if you’re only putting aside a small amount each month — like the 20% this trend suggests — you are still setting yourself up for financial success in the future,” says O’Neill. It’s a way to ensure you have something squirreled away for a rainy day, even if padding your emergency fund isn’t a main goal.

According to Cisneros, this plan is also wonderfully simple. “It’s easy to understand and implement, which makes budgeting less daunting,” she says. If you’re budgeting for the first time, it can provide a clear framework to get started as you sort out your finances. Simply divvy up your paycheck and distribute accordingly.

Saving 30% Of Your Budget For Fun

One of the best — and arguably most motivating — aspects of this budgeting hack is how it allows you to have a good time. By allocating 30% of your income to wants, it means you can still get out there and enjoy life.

“This portion can cover entertainment, dining out, hobbies, vacations, and shopping,” says Cisneros, think drinks with the girls, takeout on a lazy Friday night, and even fun splurges, like a cute new sweater for fall.

This approach might also help save you from overspending, especially if you’re someone who tends to go overboard when you feel restricted. “Including the 30% category makes the budget more sustainable in the long term,” says Cisneros. “This balance can help prevent feelings of deprivation and reduce the likelihood of abandoning the budget altogether.”

Thirty percent is also just enough to have fun without putting yourself in a tight financial spot. Depending on your take-home pay, 30% could be just what you need to afford pumpkin spice lattes on your way to work every morning — and all it takes to feel like you’re truly treating yourself.

How To Try The 50/30/20 Rule

To get started, O’Neill recommends looking at your spending habits to see where your money goes. It’s likely your monthly needs category — like your rent, utilities, car payment, etc. — will stay relatively the same, so it’ll be easy to see if 50% of your income will cover those costs. With what’s left over, you can send 20% right into a savings account and the rest is yours to spend.

If you’re worried that you’ll fly past the 30% limit, sit down at the start of each month and write down what you’d like to buy, do, or see. “Do you have a girls’ trip that’s coming up? Is your favorite artist announcing a tour? Make sure you’re accounting for that in the coming month’s budget to stay on track with your spending plan,” says O’Neill.

Give this budget a try for a few months to see if it works for you. If it isn’t a fit, you can tweak the percentages to match your lifestyle, especially if you live somewhere with a higher cost of living. According to Cisneros, the 50/30/20 hack can set you on the right track toward saving, but it’s also OK if you need to change it up as your financial goals evolve.

It’s also good to keep in mind that budgeting hacks are just guidelines. “Things may come up where you need to adjust your categories,” says O’Neill. “For example, if your car needs an emergency repair, you may need to reallocate some of your money toward ‘needs.’ Or if you have multiple weddings to attend, your spending in the ‘wants’ category may be slightly higher.”

If that happens, simply adjust your percentages for the month — and then get back to your 50/30/20 in the future.

Sources:

Gloria Garcia Cisneros, CFP, wealth manager with Lourd Murray

Holly O’Neill, president of retail banking at Bank of America