Senator Elizabeth Warren’s 50-30-20 Rule Could Finally Fix Your Budget

Budgeting successfully means categorizing your money with your goals in mind.

So many things can distract you from achieving your goals — especially goals centered around saving money. Conflicting objectives like traveling more versus growing an emergency savings account or simply reaching for too many goals at once can spread your saving and budgeting efforts thin.

The 50-30-20 budget is an alternative to traditional, and sometimes complicated, budgeting methods. Sen. Elizabeth Warren, D-Mass., helped create this simpler approach to budgeting — and many financial experts have come to embrace it as a practical money-management strategy.

Read: How Much Money You Need to Live Comfortably in the 50 Biggest Cities

How the 50-30-20 Budget Works

With so many competing wants and needs in your life — such as buying a home, paying off debt, traveling the world — it can be difficult to determine how much money to save for different goals. Some personal finance experts promote austerity measures or using complicated budgeting tools or budgeting worksheets to manage your money. But the 50-30-20 rule reveals how simple budgeting can be.

In her book, “All Your Worth: The Ultimate Lifetime Money Plan,” Warren and her co-author and daughter, Amelia Warren Tyagi, provide a straightforward and actionable solution for how to make a budget. With the 50-30-20 budget you divide up your after-tax income, or net pay, into the following three ways.

50 Percent for Needs

Allot half of your net pay for needs. Needs include any expenses you cannot forgo in a given month, including:

30 Percent for Wants

The 30-percent category might be the most surprising part of Warren’s budgeting rule, as a significant portion of your income is allotted to nonessentials. Wants include expenses such as:

  • Going out to dinner
  • Traveling
  • Concert tickets

20 Percent for Savings and Debt

Saving money and paying down debt — which so many personal finance experts emphasize as a priority — takes the smallest portion of the 50-30-20 budget. The 20-percent category includes:

  • Emergency fund savings
  • Retirement savings
  • Extra payments toward debt

Read: 10 States Most (and Least) Likely to Live Paycheck to Paycheck

Balancing Wants and Needs

Elle Kaplan, CEO and co-founder of LexION Capital Management, shared why Warren’s rule makes so much sense. “By following a clear strategy and automatically diverting a portion of each paycheck, you save effortlessly without feeling deprived by having a constant focus on budgeting and penny-pinching,” Kaplan said.

Applying the breakdown to your paycheck makes it easy to create your budget. If your paycheck comes out to $3,000 per month after taxes, your budget would look something like this:

  • $3,000 x 0.50 = $1,500 for needs
  • $3,000 x 0.30 = $900 for wants
  • $3,000 x 0.20 = $600 for savings and debt

Warren’s 50-30-20 rule supplies concrete benchmarks for saving and definitive guidelines for how to make a make a budget while also giving you room for options. Instead of feeling punished by a restrictive budget, the 50-30-20 rule gives you extra wiggle room to enjoy your hard-earned money while still accomplishing what you need to do for the present and future.

Success Using Elizabeth Warren’s 50-30-20 Rule

Putting any budget into action can sound difficult, especially when it comes to determining what kinds of purchases are considered needs versus wants. For example, you might need groceries, but you don’t necessarily need a bag of Doritos. Ultimately, you have to make choices in how you categorize each purchase so you don’t exceed your budget categories.

Using the 50-30-20 rule can make the process of applying those budget categories to your everyday decisions easier. Lauren Bowling — the creator of Financial Best Life, a personal finance and lifestyle site featuring money-saving and budgeting tips — uses Warren’s 50-30-20 budget to live a fulfilling life in a city notorious for being expensive.

“When I was 24 and living on my own for the first time in New York City, I had no idea what the appropriate amounts were for spending,” Bowling said. “I think this is what a lot of young people struggle with when creating budgets. If you’ve never been out in the world, how do you know what is, or isn’t, normal or acceptable?”

Bowling figured it out with the help of the 50-30-20 rule and was able to pay off a debt in excess of $10,000 using this method in just a single year while living in New York.

“I think a lot of people struggle with ‘savings guilt’ — at least I know I did for a while,” Bowling said. “I felt like I had to be saving some massive amount or paying off all my credit cards, and if I didn’t, that made me a failure. The 50-30-20 rule not only makes sure you aren’t spending all your money on fun or living expenses, but it also makes sure you are saving something for a rainy day; 20 percent really isn’t that much for debt repayment and savings.”

At its root, Warren’s rule is a guide for how to create a budget. Deciding how to balance your budget in a way that sufficiently covers your needs and wants is up to you — and having that ability to make choices is what could make the 50-30-20 rule the most effective budget plan for your financial goals.

Read: Money Lessons From the ‘Rich Bitch’: An Interview With Nicole Lapin

  • I never heard of this website before – but you’re pimping for Elizabeth Warren? But I guess this is just about perfect. Elizabeth Warren taking credit for an idea that is already well-known. Sort of like plagiarism, don’t you think?

    • eyeRollz

      Most financial books are simple re-stating ideas that have been around. Do you think Dave Ramsey, David Bach, Ramit Sethi or Robert Kiyosaki’s ideas are all new? No. Just repackaged to sell to their respective audiences. Stop being an i.d.i.o.t.

      • RecklessProcess

        Like Liarwatha restating that she is an indian minority who used affirmative action to get into college?

  • News flash! Elizabeth Warren’s “Eat Less Food” diet will help you lose weight.

  • BigDog40

    This comes from Warren? Run and hide. It should be the 50/50/30/20 plan. The first 50% goes to the government and the rest is yours until the government decides their take should be 60%

    • kevinkray

      What a stunningly asinine statement, completely unsupported by any action Warren has taken.

      • falling321

        The commenter did not say Warren caused our 50% plus tax rate when you add in all taxes across the boards, but it exists. When more of my hard earned money goes to the taxman than it does to my family, something is seriously wrong with our government….and that means federal, state and local government! They are spending FAR too much on things that are unneeded, wasteful, unConstitutional and outright fraudulent! 50% to the government does not leave much for necessities, fun and savings! Apparently the current governments goal is to force us all below the poverty line!

    • Sandy Fischer

      good math

    • Fraudy

      Very true !!!!!!!!!!! Warren is a socialst !!!!!!! run for your life

  • R jones

    Love Warren, however, this plan only works if you make 200% of your monthly “needs” expenses. I need there to be jobs that pay that much. You can’t save what you don’t have! Focus on good paying jobs first, then we’ll discuss what to do with all that money!

    • eyeRollz

      Then get rid of your cable, get a cheaper phone and data plan, move into a cheaper house/apartment; really look at what you are spending your money on. It’s a guideline. If your “needs” are higher, adjust the other catagories until you get the percentages where you want them to be. It won’t happen overnight; Americans need to get over this instant gratification fetish they’ve got going.

      • RecklessProcess

        I need to adjust my Tax category. How do you suggest I limit my being enslaved for half my income every year?

        • TexasBill

          Get someone else to prepare your taxes. Or move to a state with lower taxes.

  • JKol17

    she’s kidding right??? How many of us have a job that only requires 50% of our net pay to live? I guess I could just pay 1/2 my bills and let the gov’t pay the other 1/2..I’m sure this works well for her supporters…another genius in washington

    • gc5656

      Maybe if you purchase your needs based on what you make, you can afford to only spend half your net income on them. Do you have to buy a new car every x years rather than x+2 years? Do you really have to buy the most expensive house your income will support?

      • falling321

        Perhaps you haven’t heard, but since Obama took office, we have moved millions onto the government dole. Meaning those living in HUD housing, on foodstamps and medicaid are often working, but still unable to pay for their own basic needs. And with all the new taxes and fees that are hitting us in the coming year, there are going to be even more unable to pay for the basics, much less the type of extravagance you are talking about! And it is really starting to show…even Walmart has reported far lower sales in the last quarter than they have had in decades.

  • T-Bones

    Now we need to teach the difference between wants and needs. Many people confuse things they want with things they need. They justify buying their wants by calling them needs.

  • Joe ole

    Are u kidding me? Again, Warren, with two huge incomes, is telling US how to manage our meager incomes? Please. This is Harvard liberal arrogance at its finest.

    • MCJNY

      what part of the her equation is wrong or not sensible? Can you separate your apparent hatred for her education and intelligence from the validity of her ideas or is this whole thing over your head?

      • falling321

        While I agree that everyone needs a plan for budgeting their money and all of us should routinely go over that budget in order to eliminate our natural leaning towards putting wants into the needs column, Warrens plan assumes that most people have money left over after paying for their most basic needs. Unfortunately, that is just not so today. Government, at all levels, is taking more off the top, jobs are scarce and most are not even full time. With our welfare, disability and food stamp rolls filled to overflowing and our youth moving back home with their parents, un or under employed after college, is it any wonder that Warrens plan sounds ludicrous to so many?

  • ricbee

    Just seeing her name makes me ill.

    • Matthew 6:5

      SOOO proud to have her as my Senator!

      • falling321

        You are proud to have a woman who lied about her ethnicity to ensure she went to the head of the line representing you in DC? And then, instead of sincerely apologizing and making restitution for both the scholarship money she recieved and the place she stole from a truly qualified candidate, she lied again and made excuses for her orginial lies!. Your standards must be very, very low. BTW, if she will lie about being an American Indian in order to go to the head of the line in college and politics, she will lie to you in order to get your vote.

        • Matthew 6:5


          • falling321

            And I’m not at all surprised.

  • some guy

    Man i need to get that job where you can cover all your needs in 50%. I am spending almost 90%.

    • MCJNY

      it may be time to take a long look at what constitutes a “need”

      • mahopinion

        In my city, housing alone can easily take up that 50% for rent on a very modest place. Sucks, but that’s what it is.

        • MCJNY

          agreed. I have had to alter my spending habits to reflect the new reality. I have shifted my spending to be more streamlined and less wasteful. I literally audited my spending. This is what I would like the federal government to do that no one has even discussed.

          • mahopinion

            Agreed that the government needs to be streamlined. But I think what people are taking objection to with Warren’s flip answer is that MANY personal budgets are already streamlined down to the penny due to economic circmstances. If you’ve ever read any of Warren’s other writings, she also supports single income families as the solution to financial woes. She’s hopelessly out of touch with what real families are going through right now.

          • MCJNY

            I can’t argue with your feelings here. Nor would I try. We all see our family as the model of the rest of the world. It’s human to do so. Our pov is the lens that we let the world pour in through. I can tell you from my personal experience, that many many americans are hopelessly wasteful. And hopeless in love with a lifestyle aesthetic that they can’t afford. I have a few of them in my own family. They will beg, borrow and steal to acquire things they don’t need. Warren has been demonized by the right but in reality, she was one of the loudest voices trying to protect the public from the predations of the banking industry. In particular, the credit card/finance companies. There is an important documentary that I think you will enjoy and find informative. Its called maxed out. Warren is one of the key speakers in it. And what is telling us is so true that I often wonder why anyone had to tell us this. Search for it free in youtube. Good talking with you.

  • Alaska47

    Guys, at least it is a plan. One can adjust, But as long as one cannot identify what needs are or accept that one should try their best to live within their means, than it falls on deaf ears. Just being on autopilot demeaning advice because it does not come from your favorite people may simply mean you won’t listen in the first place. Granted, it is easier if you are making big bucks, but a lot of those guys spend all they make and more also. Why do you think 60-80% of pro athletes who make tons of money end up bankrupt? I tend to side with eyeRollz. First, accept you need a plan; then adapt.

  • RecklessProcess

    Chief Liarwatha is an idiot. She is like most totalitarian democrats who won’t be happy until we are all tax slaves year round instead of just from January to June.

    • thedarryl

      Hey everyone, take a look at some of this poster’s other gems:

      “you cannot refute a single thing Nugent said. All you can do is try to insult him like a little baby crying for your bottle.”

      “All you idiots do is call everyone names as if anyone cares about your name calling. Calling people names is infantile and pointless. You are completely incapable of displaying intelligence. “

      • Arminius Aurelius

        You are absolutely correct . The dumbest of the dumb , the losers , the fools that spend , spend , spend and never learn to control their urges , live the good life , party on dude until suddenly when it is time to retire they have no savings and then live the last 25 % of their life impoverished . WHAT FOOLS YE MORTALS BE .

    • kevinkray

      Maybe it’s time to look up the word “totalitarian”?

  • $28036871

    I see a lot of postings on ” needs” – what is a ” need “??

    You need shelter – you need food – you need clothes and you need a job to supply those things.

    You may need a car to get to your job and you may need a privately owned mobil device to do your job.

    You do not need cable – you do not need video games – you do not need a new car – you do not need a cell phone with texting – you do not need to go out to dinner – you do need to go vacation each year and the list goes on and on. Easy? no..but we’re talking about ” true needs”.

    If one was to focus on only their needs you would be amazed on the money saved.

    …and before you pay anybody – mortgage, utilities..etc. you pay yourself each pay period no less then 10% toward savings.

    Really quite simple and a proven plan that works – Ms. Warren has broken no new ground here…in fact her plan has much room for improvement.

    • falling321

      In an ideal world, you would be correct, but you can only pay yourself first if you know that there will be enough left over to keep the lights on and your children fed. Far too many today are unable to provide themselves with the most basic of necessities, much less provide them after “paying themselves first”. But everyone should be looking over their budget and finding ways to cut back…especially those in government positions. Yet who can blame people for being resentful when officials like Warren are calling for increased government spending and higher taxation, while at the same time telling us how to allot the hard earned dollars they allow us to keep? Especially as we watch them throw the money they force us to give them down sinkhole after sinkhole!?

      • $28036871

        In a perfect world….depends……My mom raised 4 boys on a minimum wage which at the time (45 years ago) was $1.00 per hour. We never went hungry and always had a roof over our head. On her death bed she proudly handed me a savings book and told me to open it. Just a little over a thousand dollars..I was amazed. I ask how she did it. She responded with a great deal of pride…only buy the things you need. Even in a not so perfect world it can be done.

        As far as the government goes..they have their eyes on your 401k’s and IRA’s..over 19 trillion in those two. The liberals feel they could better manage it for you because we’re too ignorant to do it on our own……..don’t tell my Mom that.

        • falling321

          We have a very similar background, except my mother was left raising three girls age 5 and under when her husband died within six weeks of being diagnosed with melanoma. Over night she went from being a mother and housewife to sole supporter of her family. As you said, minimum wage wasn’t much back then and it took long hours and more than one job to cover the very basics in housing, food and clothing. And by the time she retired at age 73 due to a colon cancer diagnosis, she had worked her way up from change girl in a laundry mat to head of a major department at Circuit City. All on a high school diploma earned in a one room school house back in WVA. I do not have much sympathy for today’s youth or for those who claim there are honest jobs that American’s will not do! I have pulled tobacco, taken in ironing and sewing, made cakes, baby sat for my neighbors, delivered newspapers, waitressed, delivered pizzas and anything else that was necessary to help fill in the holes in the family budget as my own husband worked his way up the corporate ladder…along with carrying for my own 3 sons and daughter. And I have even less sympathy for a government that refuses to produce a budget, wastes my money on completely unnecessary things and buys votes with free cell phones!

          • $28036871

            I have a friend who’s son feels that working ” for someone” begets servitude he puts it.

            He is in his late 30’s and living at home looking for someone to pay his college loan off…one of the weak kneed 99%. He’s a good guy..just another low informed voter who has never been taught that no one owes you anything. You read some of the postings here and the amount of ignorance..lack of critical thought..the refusal to look reality in the face….and then to top it off…to believe the very people who are the root cause of our problems, it is indeed worrisome.

            I’d say most do not know what hard work and sacrifice is…..they do,however believe that somebody owes them something and that they have a right to it.

            I remember my mom saying “Looks like I’ll have to find a way to prepare water for dinner tonight”.

            Stay well

  • Tonto

    Heap good advice.

  • Ranbo

    And what if your needs exceed your paycheck? dumba……

  • Hutch

    Wow. There sure is a lot hatred and anger behind some of these comments. It’s a suggestion, folks. A guideline. Nothing more, and nothing less. If your needs are bigger than your paycheck, you should be looking for a better paycheck. And no, I’m not suggesting that’s an easy thing to do. I know it isn’t. But you know what? It’s a necessity, and it should be your goal, unless you want to keep living paycheck to paycheck.

    • falling321

      Evidently you do not recognize just how “not easy” it is to find a better paycheck today. Our youth are moving back home after college because they are un or under employed. Our elderly are being forced into early retirement far earlier than they expected, when their unemployment runs out. Millions of working age citizens have been moved to government disability rolls for reasons that are far from disabling, but it helps keep unemployment numbers low. And more and more millions are being moved onto government foodstamp rolls every single day. Full time is now 30 hours a week, benefits are being reduced, educated-experienced workers are being forced to take jobs in the service industry just to keep a roof over their head. So how can you be surprised when people are frustrated and angry when a very wealthy woman tells them that they need to start saving 20% of their meager income? Yes, we can and should, all figure out a way to cut back on spending, but that doesn’t mean we appreciate our government forcing us into poverty with their massive overspending, waste and fraud of the money they take off the top of our paychecks…and then trying to tell us how to spend what allow us to keep.

  • bonnieprincecharlie

    I’m a big fan of Elizabeth Warren, but it’s too bad that this 50/30/20 rule doesn’t say anything about charitable giving. I’d make it 50/30/10/10, where 10% is saving and 10% is giving. If you’re in debt, get out of debt by tightening on the 30%.

    • eyeRollz

      That’s a great idea. So adjust the guidelines to fit the lifestyle that works for you.

    • gc5656

      Charity is part of the 30% wants. You “want” to give to charity, but you must balance it with your other expenses. Save for your own needs first, because there is no guarantee someone else will be able to help you later!

  • Walt

    Sounds like another of her FANTASIES! She’s a fuc&in liar and nut job. Go back to your “NATIVE INDIAN ROOTS”, OH! THAT’S A LIE ISN’T IT?

  • jobu

    is this Warren a communist or just a fool?

  • Barbiedahl3

    This isn’t a political forum. This is a financial tips article. As several people stated above, she isn’t re-creating the wheel. She’s only giving some tips on how to wisely use our money. I think it’s a good thing for those of us looking for ideas.

  • Samirian @moneywisdoms

    You’re kidding right? She gets credit for what Liz Weston wrote about in her book, the “10 Commandments of Money” in 2011 (google it) and most of the personal money managment experts teach. One thing for sure about Senator Warren, she is passionate about financial education.

  • Fraudy Thompson

    Bad advice …. Richest man in babylon and the wealthy barber teach the OPPOSITE of Mrs. Warren … The FIRST %10 of your money is YOURS to keep …. all the rest goes to your bills

  • Mark Schaff

    What do you do with money that might be left over from say, the 50% set aside for paying things off? Do you put it into the wants fund or the savings fun? Or maybe split it for both?

  • Ron B

    I am surprised, but in a happy way. Politically, Sen. Warren and I are 180 on likely everything. But the concept of 50-30-20 is very feasible and doable. I retired at 47 using a similar investment concept and I lived in The People’s Paradise of California. Now low in Florida as no State income tax, and less of a socialist utopia.
    But the 50-30-20 concept is very doable regardless of where you live. Remember, you are not a tree….if you do not like where you live, you can always move.