Guide to using this budget calculator

There are countless budgeting methods and strategies that you can choose from to organize your finances. However, one of the most popular budgeting strategies is the 50/30/20 method . 

To use this budget calculator, start by entering your gross (pre-tax) annual income and effective tax rate. At this point, you'll see how much cash you have available each month to meet your financial obligations.

Next, enter your monthly needs, wants, savings, and debts (click "next" after each category is completed). From there, you'll see an overview of your monthly spending, including how well your spending aligns with the 50/30/20 guideline and how much money you have left over at the end of the month. You'll also see recommendations for adjusting your spending, if necessary.

What is the 50/30/20 budget?

The 50/30/20 budget is a guideline that suggests you direct 50% of your after-tax income toward needs (essential living expenses), 30% toward wants (discretionary spending), and 20% toward savings and investments (including debt payments). 

The benefit of this budgeting strategy is that it's simple to follow. Whether you earn $20,000 or $200,000 per year, you can tailor this budgeting rule to suit your financial needs and goals.

How to divvy your expenses into each category 

The easiest way to organize your 50/20/30 budget is by reviewing your most recent bank statements and assigning all of your expenses into one of the following three categories. 

Keep in mind that not all expenses come up every month. For example, you may only pay your insurance premium every six months. In this case, take the total cost and divide it by the number of months that expense covers, then use that average as your monthly target.

Here's a breakdown of how you can categorize your various monthly expenses:

Needs

• Housing:Rent or mortgage payment, property taxes, HOA dues, homeowners or renters insurance, home maintenance and repairs, landscaping, pest control 

• Utilities:Electricity, natural gas, water, sewer, trash collection, internet, cell phone

• Groceries:Fresh produce, meat, dairy, pantry staples, frozen foods, beverages, household essentials

• Insurance:Auto insurance, health insurance, life insurance, disability insurance, pet insurance, umbrella insurance

• Transportation:Car payment, gas, public transit fares, rideshare services, vehicle maintenance, repairs, parking fees, tolls, vehicle registration

• Healthcare:Medical insurance, dental insurance, vision insurance, prescription medications, copays, medical equipment, therapy, over-the-counter medications, medical devices, pet insurance

• Childcare:Daycare, preschool, nanny or babysitter, after-school care, childcare supplies, school tuition fees, school supplies 

Wants

• Dining & entertainment:Restaurants, food delivery, movie tickets, concerts, sporting events, books, activities

• Shopping & personal:Clothing and accessories (non-essential, such as extra shoes or luxury handbags), hair and nail appointments, spa appointments, fitness classes, cosmetics, skincare products 

• Subscriptions and technology:Streaming services, e-reader or audiobook subscriptions, monthly box subscriptions, magazine subscriptions, gaming memberships, premium apps, computer software, gadgets, tech support services 

• Gifts and special occasions:Birthday gifts, anniversary gifts, baby shower gifts, wedding gifts, gift wrapping supplies, party decor

• Travel:Airfare, hotels, rental cars, excursions, souvenirs, luggage, travel insurance 

• Donations:Religious contributions, fundraisers, or any other charitable contributions 

• Miscellaneous:One-off expenses such as bank fees, shipping fees, passport fees, tips, convenience store purchases, lottery tickets

Savings & debt

• Savings & investments:Contributions made to your emergency fund, retirement account(s), college savings, vacation fund, holiday fund, brokerage account 

• Minimum debt payments:The minimum payment required to avoid late fees and/or interest on credit cards, student loans, personal loans, auto loans, home equity loan or HELOC payments, medical debt

• Additional debt payments:Any additional payments made toward your debts after you've already made your minimum payment for the month 

What if my expenses don't fit into the 50/30/20 guidelines?

Once you've done the math, you may find that your monthly expenses don't fit evenly into a 50/30/20 split. When this happens, you have a few options. 

Adjust your spending

One of the benefits of this budgeting strategy is that it can give you a clear snapshot of your monthly spending and help you identify where you can afford to make some changes. 

Maybe you're overspending on your wants and it's time to scale back on dining out or concerts. Or, you might find that you're not allocating as much as you should toward your savings account each month. 

These percentages are meant to serve as a framework to help you create a healthy balance. For instance, if your needs only take up 30% of your income, you can afford to increase your discretionary spending and/or savings. 

However, if you currently spend 70% of your income on needs, this could get in the way of your savings and investment goals. In this case, you'll need to review your expenses and see what you can cut back on to create a more balanced budget. 

Create a structure that works for you

While the 50/30/20 method is tried and true for many, it may not work for you no matter how you slice it. 

Say you live in a city where the cost of living is high and even the most affordable housing options will still require you to spend more than 50% of your income on your "needs" category. Or, perhaps you are working towards early retirement and are dedicated to saving more than 20% of your income. You might find that a different version of this method works better for you, such as 70/20/10 or 30/30/40.

There's no harm in starting with a slightly different framework and working toward the 50/30/20 rule, or being flexible and creating a framework that works better for you. The goal is to create a budget that you're able to stick to and keeps you on track toward your financial goals.