What the rule says
The 50/30/20 rule splits the money you take home after tax into three parts. Senator Elizabeth Warren and her daughter Amelia Warren Tyagi wrote about it in the 2005 book All Your Worth.
- 50% for needs: rent or mortgage, groceries, utilities, transport, insurance, minimum debt payments.
- 30% for wants: eating out, hobbies, subscriptions, trips, shopping.
- 20% for savings and extra debt payments.
An example
If you take home €3,000 a month, that is €1,500 for needs, €900 for wants and €600 for savings.
When it does not fit
In an expensive city, needs can take more than half. In that case, treat the rule as a guide and adjust the numbers. The point is to see the three groups clearly, not to hit exact percentages.
Using it with Wollie
Wollie sorts your payments into categories. Look at last month, mark each category as a need or a want, and see where you land. Then set a monthly budget for each category and a fixed monthly amount for your savings goals.
Questions
Is the 50/30/20 rule based on gross or net income?
It uses your income after tax, the money that reaches your bank account.
What if I cannot save 20%?
Start with what you can, even 5%, and raise it over time. A habit matters more than the exact number.
This guide is general information, not financial advice.