33-33-33 Rule: A Smarter Way to Spend, Save and Enjoy Your Money
Written by
Rudri Patel
Edited by
Elizabeth Constantineau
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Want a simple way to manage your money without the stress of overcomplicating your budget? The 33-33-33 rule makes it easy: one-third for needs, one-third for savings and one-third for enjoying life. It’s a clear, no-fuss plan that helps you stay on track without feeling restricted.
What Is the 33-33-33 Budgeting Rule?
The 33-33-33 budgeting rule is a method to divide your after-tax earnings into three equal parts: needs, savings and wants. Here is the breakdown of the three categories:
| Category | What Is Included | Part Allocation |
|---|---|---|
| Needs | Living expenses: rent, food, utilities, insurance, transportation | 33% |
| Savings | Emergency fund, investments, 401(k), retirement accounts, debt payments | 33% |
| Wants | Nonessential spending: entertainment, travel, concerts, dining out | 33% |
Why the 33-33-33 Rule Works
There are three key reasons why the 33-33-33 rule works for budgeting.Â
- Simple and easy to follow. You don’t have to overthink the 33-33-33 rule because the categories are easy to separate. You can easily adjust the categories as your income increases.
- Builds strong saving habits. Because you know how much to save, you can automate your savings. You consistently build wealth without having the pressure to find money later.Â
- Encourages guilt-free spending. Since you know that you are already saving for retirement and taking care of your needs, you can spend the remaining third however you want. You have peace of mind to spend freely because you’ve taken care of your financial priorities.
33-33-33 Rule vs. 50/30/20 Rule
How does the 33-33-33 rule compare to the 50/30/20 rule? They are both ways to manage your money but they split up funds in different ways.Â
The 50/30/20 rule allocates 50% to living expenses, 30% to wants and 20% to savings.
Take a look at this comparison chart to see how each budgeting method works in terms of categories.Â
| Rule | Needs | Wants | Savings/Investments |
|---|---|---|---|
| 33-33-33 | 33% | 33% | 33% |
| 50/30/20 | 50% | 30% | 20% |
Good To Know
The 50/30/20 rule may be a better fit for those with higher housing or family expenses.
The 33-33-33 rule could work for aggressive savers or anyone focused on building wealth quickly.
Who Should Use the 33-33-33 Rule?
Everyone has the option to use the 33-33-33 rule. However, there are certain categories of people who may benefit the most from using the 33-33-33 rule for their budgets.
- Young professionals.
- Provides a simple, no-nonsense way to budget. For young professionals, it encourages savings while also emphasizing fun. Â
- People with flexible income.
- For individuals whose income may go up or down, you can adjust the percentages based on the income that you’re earning.
- Couples looking for a joint budgeting method.
- If, as a couple, you want to explore a new budgeting plan, the 33-33-33 rule is a good place to start.Â
- Anyone seeking a minimalist approach.
- There are no complicated categories, and it is easy to track where your money is going with this approach.
How To Start Using the 33-33-33 Rule
Want to know how to start the 33-33-33 rule? It is easy. Follow this checklist:Â
- Know your monthly after-tax income. Make adjustments as necessary based on what you earn.Â
- Divide it into 3 equal parts. Categorize spending into needs, savings and wants.Â
- Prioritize essential experiences. Make sure you prioritize living expenses and savings first.Â
- Set up auto-transfers to savings. Automate your savings so you don’t need to catch up later on building wealth.Â
- Give yourself a guilt-free fun spending account. Spend freely on entertainment and fun.Â
Sample Budget Using the 30-30-30 Rule
Sam has an after-tax income of $4,000. Based on this calculation, he would allot $1,333 to living costs, $1,333 to savings and $1,333 to non-essential spending.Â
Here is the breakdown of the amounts based on the categories:Â
| Category | Included Expenses | Amount |
|---|---|---|
| Needs: $1,333 | Rent | $800 |
| Utilities | $120 | |
| Groceries | $300Â | |
| Transportation | $113 | |
| Savings: $1,333 | Emergency fund | $500 |
| Retirement contributions | $400 | |
| Credit card payments | $250 | |
| Investments | $183 | |
| Nonessential needs: $1,333 | Dining out and coffee shops | $250 |
| Entertainment (movies, subscriptions)Â | $200 | |
| Shopping | $250 | |
| Miscellaneous | $633 |
Final Take
Ready to take control of your money? Try the 33-33-33 rule for one month. Track where your money goes, make adjustments if needed, and see how a balanced budget can bring more peace of mind.
FAQ
Here are the answers to some of the most frequently asked questions about the 33-33-33 rule.- How does the 33-33-33 rule compare to the 50/30/20 rule?
- The 50/30/20 rule allocates 50% to living expenses, 30% to wants and 20% to needs.
- The 33-33-33 rule distributes 33% to each category.
- The 33-33-33 rule is aggressive when it comes to savings, while the 50-30-20 rule accounts for high living or family costs.
- Is the 33-33-33 rule realistic for low-income households?
- It may not be realistic if basic living needs take up at least 33% or more of your costs. It may be better to use the 50-30-20 rule in this instance.
- Can I use the 33-33-33 rule with a partner?
- Yes, you can combine both individuals' incomes and then divide them in thirds for each category. Have an agreement on what counts as needs vs. wants.
- What budgeting apps support the 33-33-33 method?
- There is no official 33-33-33 mode on budgeting apps, but you can create custom categories. YNAB, Monarch and Goodbudget are apps that may be helpful.
- What's the best way to track spending across these 3 categories?
- You can set up three buckets for each category. Track the spending on an Excel spreadsheet or a budgeting app.
Elizabeth Constantineau contributed to the reporting for this article.
