The 50/30/20 budget works because it’s simple: 50% of after-tax income for needs, 30% for wants, 20% for savings. Three categories instead of thirty. Actually sustainable.
The Monthly Budget Template has this structure built in - just enter your income and expenses, it calculates the percentages.
The Three Buckets
The 50/30/20 framework splits income into three broad categories. Each serves a different purpose, and the percentages represent a balance between living comfortably now and building for the future.
50% - Needs covers essential expenses you’d have to pay regardless. Housing, utilities, groceries, transportation, insurance, minimum debt payments. These are the bills that keep arriving whether you want them to or not.
30% - Wants is non-essential spending that makes life enjoyable. Dining out, entertainment, hobbies, subscriptions, vacations. The stuff you could cut in an emergency but don’t want to.
20% - Savings and Debt builds future security. Emergency fund contributions, retirement savings, extra debt payments beyond minimums, investments. This percentage is what separates people who build wealth from people who just earn income.
Setting Up a Spreadsheet
Building a 50/30/20 tracker in Google Sheets takes about 15 minutes. Start by calculating your targets based on after-tax monthly income. If you bring home $4,200 per month, your targets are $2,100 for needs (50%), $1,260 for wants (30%), and $840 for savings (20%).
Create a basic structure with columns for Category, Target, Actual, and Difference. The difference column tells you instantly whether you’re over or under in each bucket. Under each bucket, list your specific expenses - rent, utilities, groceries under needs; dining out, entertainment, subscriptions under wants; emergency fund, retirement contributions under savings.
The formulas are straightforward. For targets, multiply your income by the percentage: =Income*0.5 for needs, =Income*0.3 for wants, =Income*0.2 for savings. For the difference column, use =Target-Actual. Negative numbers mean you’re over budget in that category, positive means you have room to spare.
The Gray Areas
Some expenses blur the line between need and want, and that’s where this system requires some honest self-assessment. The categories aren’t always obvious, which is why many people struggle to categorize their spending accurately.
Internet service is a classic example. If you work from home or need it for job searching, it’s a need. If you only use it for streaming and gaming, it’s closer to a want. Clothing works similarly - basic work clothes are needs, but fashion shopping crosses into wants territory. Groceries get tricky too. Basic food is clearly a need, but premium brands, specialty items, and treats start to look more like wants.
The honest test is whether you could survive without it. If the answer is yes, even uncomfortably, it’s probably a want. Being rigorous here makes the system work better. Categorizing wants as needs is tempting but defeats the purpose.
When the Numbers Don’t Fit
Many people discover their current spending doesn’t match 50/30/20, and that’s normal. The percentages are targets, not requirements. Real life is messier than clean thirds.
If needs exceed 50%, it’s usually housing costs - especially in expensive cities. Some people consider roommates, moving to cheaper areas, or downsizing. Another approach is temporarily adjusting to 60/20/20 while working toward the ideal split. The goal is progress, not perfection from day one.
Wants exceeding 30% is common and often fixable. It’s worth looking at subscriptions (most people have more than they realize), dining out frequency, or adding a waiting period before purchases. If savings can’t reach 20%, starting with what’s possible still works - even 5% builds the habit and momentum. Some people gradually increase by 1% each month or direct raises entirely to savings.
Variations
The 50/30/20 framework has spawned several variations for different situations. 60/20/20 works for high cost-of-living areas where needs genuinely exceed 50% and that’s just reality, not overspending.
50/20/30 (flip) appeals to younger earners focused on aggressive saving. Wants drop to 20% while savings get 30%. The logic is that lifestyle inflation is easier to prevent than reverse.
80/20 simplified combines needs and wants at 80%, with savings at 20%. Some people find three categories still feels like too much mental overhead. If your needs and wants are under control, tracking them separately might not add value.
Monthly Review
At month end, enter actual spending in each category and compare to targets. This is where the learning happens. Note what worked, what didn’t, and what surprised you. Use those insights to adjust next month’s behavior. The process takes maybe 20 minutes and compounds over time.
The 50/30/20 rule won’t solve every financial problem. But it provides a framework for balanced spending that’s simple enough to actually maintain. Complexity is the enemy of consistency, and this system stays simple.
Common Questions
Does it work at all income levels? It can be challenging at very low incomes (where needs consume more) or very high incomes (where 50% for needs is excessive). Adjust the percentages while keeping the principle of balance.
Gross or net income? Use net (after-tax) income. Apply the percentages to money you actually receive.
What about variable income? One approach is budgeting based on the lowest typical month. When income exceeds expectations, the surplus goes to savings.
Get Started
The Monthly Budget Template comes ready for 50/30/20 budgeting. Enter income, categorize expenses, see your percentages automatically. No formulas to set up, no structure to build.
Related
- Annual Budget Template - see your 50/30/20 ratios across a full year
- Monthly Budget Template - monthly 50/30/20 tracking