You’re budgeting wrong now — why the 50/30/20 method no longer works and how much you should save instead (2024)

This financial plan may no longer make cents.

Sen. Elizabeth Warren’s 50/30/20 method was once touted as a gold standard for budgeting, fortifying followers for a strong financial future while still allowing them to enjoy their day-to-day lives.

Under the system — popularized by the Massachusetts Democrat and her daughter, Amelia Warren Tyagi, in their 2006 book “All Your Worth: The Ultimate Lifetime Money Plan” — workers ideally spend 50% of their after-tax income on needs and 30% on wants while putting the remaining 20% into stocks, savings or a retirement fund.

But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they’re struggling to make ends meet.

Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.

“If you’re taking someone that’s just starting or living paycheck-to-paycheck, it can be unrealistic or overly drastic, especially as they’re beginning to really get a handle on their finances,” Brian Walsh, ​​head of advice and planning at digital bank SoFi, told Time last week.



With housing costs mushrooming in recent years, some say they’re spending more than half of their after-tax income on rent or mortgage payments alone.

Then, there are the ballooning costs of other essentials, such as food, gas and utilities.

Being flexible with your finances in the face of such exorbitant expenses is okay, experts assert, as long as you’re still savvy with savings methods.

“It’s important to have rules of thumb and structures that can help guide us and get things organized, but there aren’t any rules that are written in stone, and that’s important to know,” Kevin L. Matthews II, founder of the financial education firm BuildingBread, declared to Time. “[But] it’s important to be flexible.”

“If you’re a young adult, 60/30/10 is just fine,” Michael Finke, professor of wealth management at the American College of Financial Services, chimed in. “Then you can gradually, as you reach middle age, increase that savings rate.”


While cutting the savings portion from 20% to 10% might feel drastic, Finke says in particularly tight circ*mstances it’s even okay to put away as little as 6% of your income if you have an employer who will match your 401(k).

“Make sure you get every single cent of the employer match,” he implores. “It’s a 100% return on your investment.”

Meanwhile, some budgeters have discovered the benefits of cutting down on the “wants” portion of their spending, meaning you may not have to spend 30% of your income keeping up with the Joneses.

Chrissie Milan, 25, says she’s set to save $8,000 this year by cutting out four simple things she was mindlessly spending her money on.


The Londoner has stopped spending $200 a month on clothes and has also opted not to buy daily coffees and lunch while working in the office. The latter tactic saves her $300 a month.

Finally, the spendthrift cut out fancy dinners with friends, choosing to make meals at home, something she says she actually enjoys.

“It is about getting to the root of what’s important,” Milan claimed to SWNS. “Stripping everything away and starting from zero helps you realize what you miss and what you don’t.”

You’re budgeting wrong now — why the 50/30/20 method no longer works and how much you should save instead (2024)


Why might the 50-30-20 rule not be the best saving strategy to use? ›

Some Experts Say the 50/30/20 Is Not a Good Rule at All. “This budget is restrictive and does not take into consideration your values, lifestyle and money goals. For example, 50% for needs is not enough for those in high-cost-of-living areas.

Is the 50/30/20 rule outdated? ›

But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they're struggling to make ends meet. Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.

How much money are you saving if you follow the 50-30-20 rule of budgeting? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What are the flaws with the 50-30-20 rule? ›

Disadvantages of the 50/30/20 Budget

Many people find it hard to allocate 20% of their income toward savings. If you live in a large metropolitan area with a high cost of living, it may be difficult or impossible to include all your needs with only 50% of your income.

What's better than the 50/30/20 rule? ›

The 60/30/10 budgeting method says you should put 60% of your monthly income toward your needs, 30% towards your wants and 10% towards your savings. It's trending as an alternative to the longer-standing 50/30/20 method. Experts warn that putting just 10% of your income into savings may not be enough.

How to start following the 50 30 20 rule to eliminate budgeting stress? ›

The 50/30/20 rule can make budgeting easier. The rule allocates 50% of your take-home pay to needs, 30% to wants, and 20% to savings. Debt payments are technically in the savings bucket. You'll need to decide how to split that 20% between debt payments above the minimums and cash savings.

What is the 50 30 20 budget rule? ›

The 50-30-20 rule is a common way to allocate the spending categories in your personal or household budget. The rule targets 50% of your after-tax income toward necessities, 30% toward things you don't need—but make life a little nicer—and the final 20% toward paying down debt and/or adding to your savings.

Can you live off $1000 a month after bills? ›

Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.

Who popularized the 50 30 20 budget rule? ›

The rule was popularized by U.S. Sen. Elizabeth Warren and her daughter Amelia Warren Tyagi in their 2006 book, “All Your Worth: The Ultimate Lifetime Money Plan.”

Does retirement savings count in the 50 30 20 rule? ›

Does the 50/30/20 rule allow for a 401(k)? Your retirement savings are an important part of the 50/30/20 method. In the "savings" section, you can apply some or all of the 20% you save to your 401(k), IRA or other retirement account.

What is the 50 30 20 rule of budgeting spending on wants should not exceed? ›

Key Takeaways. The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

Is the 30% rule outdated? ›

The 30% Rule Is Outdated

To start, averages, by definition, do not take into account the huge variations in what individuals do. Second, the financial obligations of today are vastly different than they were when the 30% rule was created.

Which of the following expenses is a want according to the 50 30 20 rule? ›

Remember, a need is an essential expense that you can't live without, such as rent. A want is an additional luxury that you could live without, such as dining out. And savings are additional debt repayments, retirement contributions to your pension fund, or money that you're saving for a rainy day.

Why is the 50 20 30 rule easy for people especially those new to budgeting and saving? ›

Why is the 50-20-30 rule easy for people to follow, especially those who are new to budgeting and saving? It is a straightforward way to save. The 50 and 30 allows you to spend on essentials and items of your choice and the 20 allows you to save and pay off debts.

When might the 50/30/20 rule not be the best saving strategy to use Quizlet? ›

When might the 50/30/20 rule not be the best saving strategy to use? It wouldn't be best to use the 50/30/20 rule if you have low income or live in a rural area that has high living costs.

What is one drawback of zero-based budgeting? ›

Zero-based budgeting is also resource-intensive. It takes a lot more time and effort to closely review and justify every budget element rather than modify an existing budget and review only new elements. Some critics argue that the benefits of zero-based budgeting don't justify its time cost because of this.

Why don t people use high yield savings accounts? ›

While you can grow your money daily and take on zero risk with high-yield savings, they are not the best way to grow your wealth long-term. The rate of inflation can be higher than the yield you earn over time, so it's better to not keep piling cash into your savings and instead invest your money.


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