50/30/20 Budget Calculator – NerdWallet

Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment. You can also sign up for a free NerdWallet account to use our 50/30/20 budget breakdown and identify areas where you can save.

The 50/30/20 rule is a popular budgeting method that splits your monthly income among three main categories. Here’s how it breaks down:

Before you can slice up your 50/30/20 budget, you need to calculate your monthly take-home income. This figure is your income after taxes have been deducted. It’s likely you’ll have additional payroll deductions for things such as health insurance, 401(k) contributions or other automatic payments taken from your salary. Don’t subtract those from your gross (before tax) income. If you’ve lumped them in with your taxes, you’ll want to separate them out — subtract only taxes from your gross income.

Necessities are the expenses you can’t avoid. This portion of your budget should cover required costs such as:

• Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment bucket.

• Child care or other expenses that need to be covered so you can work.

Distinguishing between needs and wants isn’t always easy and can vary from one budget to another. Generally, though, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:

Savings is the amount you sock away to prepare for the future. Devote this chunk of your budget to paying down debt and creating a financial cushion.

How, exactly, to use this part of your budget depends on your situation, but it will likely include: