The 50 30 20 rule, popularised by Senator Elizabeth Warren in her book "All Your Worth: The Ultimate Lifetime Money Plan," is a straightforward budgeting framework that divides your after-tax income into three broad categories: needs, wants, and savings.
50% for needs: this portion of your income is allocated to essential expenses that are necessary for maintaining your lifestyle. This includes rent or mortgage payments, utilities, groceries, transport, insurance premiums, minimum debt payments, and other unavoidable bills.
30% for wants: this category is for discretionary spending or wants, including non-essential expenses that enhance your lifestyle but are not crucial for survival. Examples may include dining out, entertainment, travel, hobbies, fashion, and other luxuries.
20% on savings or debt: the final category focuses on securing your financial future, and should be allocated towards paying off debt beyond minimum payments or putting money into a savings account, investment, or pension fund.
