How the 50/30/20 Rule of Thumb Works for Budgeting

Wouldn’t it be nice if you could budget without a lot of fuss? The 50/30/20 rule of thumb can help you do exactly that.

Using the rule helps you to quickly see both where you stand and where you may need to adjust. It’s an easy way to get a big-picture view.

What is the 50/30/20 Rule of Thumb?

The 50/30/20 rule is a simple way of budgeting. To use it, you put 50% of your after-tax income toward needs (aka must-haves), 30% to wants, and 20% to savings (and debt). Like all rules of thumb, it acts as a broad guideline that works for many people.

It was created / made popular by Elizabeth Warren (yes, that Elizabeth Warren) and Amelia Warren Tyagi. They call it the Balanced Money Formula in their book, All Your Worth.

Warren & Tyagi point out that comparing your spending to the rule “helps you flag when something is wrong, and it shows you where you need to take a closer look at your money choices.”
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A Budget Categories List That’s Super Easy to Use

Coming up with useful budget categories can be a challenge. Especially if you’re like me, and can see relationships between pretty much everything.

But grouping your spending by category can make things so much easier down the road.

Why? Because you’re less likely to let important things slip through the cracks, or to be hit with surprise or irregular expenses.

To make the whole process easier, here’s a list of some of the most common budget categories for you, followed by tips on using them.
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How to Track Your Spending So It Actually Makes a Difference

“Track your spending!” they say. “It’s so important!”

And so maybe you dutifully add up all of your expenses at the end of the month. (Or maybe you don’t.)

But here’s the thing:

  • Do you know why tracking your spending is so important?
  • And do you know how to track your spending so that it makes a difference in your life?

If your answers to those questions are no, you’re not alone.
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The Best Home Budgeting Software and Budgeting Tools for Your Life

The best home budgeting software and budgeting tools can help you track spending and monitor your goal progress. There are many free and premium apps out there that cater to (almost) any budget style.

They’re especially useful if you need help making a spending plan or figuring out how best to save for a large purchase. (Most of us are great at making goals like those, but need help starting a new routine and following through.)

Maybe you’re not sure if you like spreadsheets, money envelopes, or a basic spending comparison tool more. Those are all types of home budgeting software that can can help you manage your money better.

(Note: Any prices are accurate as of the original publication date, but always check for current pricing as they may change.)

With that said, here’s a list of some of the best home budgeting software to choose from.
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