Follow the 50/30/20 rule

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Submitted by: Manisha Thakor


The 50/30/20 rule* is an excellent balanced spending formula. It prescribes that 50% of your take-home pay should go to needs, 30% to wants and 20% to savings.


For the savings part of the formula, your priority is to put aside 20% of every dollar you earn for the future. Paying down debt belongs in the savings part of the formula because the more you pay it down, the more you’ll save on interest. Once the debt is gone you can put the full 20% towards pure savings.


* Introduced by Senator Elizabeth Warren in her book All Your Worth.