It is a great feeling when you get paid for all the efforts you’ve put in at work after a long (or short) month. The excitement overwhelms you for a moment, and sometimes, your mind wanders off as you think of all the things you can do with your money. Savor the moment all you want, but do not forget to stick to your budget.

By the end of this post, you’ll be clear on the 50/30/20 budgeting system and how it can help you achieve your financial goals.


Basically, your money should go to your needs, wants, and your savings. Have you heard of the 50/30/20 system of budgeting? It is a proactive budgeting method that’s quite common among young adults of this present day. This budgeting style advocates spending 50% of your income on your needs, 30% on your wants, and 20% on your savings.

Spending your hard earned cash is all about what choices you make, and the choices you make boils down to your budget. You need to consider the following factors while making your budget.

  • The future: This is basically saving for the future like retirement, emergency, tuition, vacation, etc.
  • The past: This has to do with any debts you might have taken out in the past like mortgage, student loan, credit card debts, etc.
  • The present: This includes your cost of living like groceries, rents, taxes, transportation, dates, etc.

The most important of all these factors is “the future”. If you must live life to the fullest and grow your finances to a point where you’ll be referred to as financially independent, then you must take your plans for the future seriously.


To abide by this rule, you have to understand that your savings will always come first before any other thing. This means you’ll have to take away the amount budgeted for your savings first and then build your budget based on what’s left.


This is the first thing you need to take care of once you receive your monthly paycheck. Your savings should include your retirement plan, emergency funds, and any other thing you wish to have which you cannot readily afford. Examples include:

  • A new car
  • College tuition
  • Wedding
  • Vacation

And so on.


Your wants, which should cost nothing more than 30% of your monthly income, are things you’ll like to have but wouldn’t put you in danger if you don’t have them. Expenses under this category can be referred to as “unnecessary” in a more general point of view. On the other hand, they are what defines your lifestyle to a very reasonable extent.

Expenses that can be classified under your wants include the following.

  • Leisure
  • Additional clothes and pairs of shoes
  • Dinner dates

To mention but a few.


Expenses under this category are necessary for your day-to-day survival as a person. In most cases, most of your needs are not the same as that of your next door neighbor. According to the 50/30/20 budgeting system, your needs should cost nothing more than 50% of your salary. This category takes up the bulk of the money because a lot of things fall under it. Some of them are as follows.

  • Rents
  • Taxes
  • Groceries
  • Debts
  • Internet
  • Transportation

And so on.

If your debts are more than you can handle with 50% of your salary as suggested by the 50/30/20 budget strategy, you can tweak it a little bit to suit your financial condition and adjust as time goes on.

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