The 50/20/30 Rule That Makes Budgeting Easy


“Budgeting” doesn’t come with a positive association. But, really it just means spending with purpose. While there’s no hard-and-fast rule for where to put your money, these are benchmarks to consider while setting up your budget.

Whether you’re a parent, or a recent college graduate, this guideline can help you figure out how much to assign to each area every month, and determine how your money should be spent.

1. Fixed Costs = 50% Of Paycheck

Fixed Costs are bills and expenses that don’t vary much from month to month, like rent, mortgage payments, and car payments. Subscriptions, such as gym memberships and Netflix accounts, are fixed costs because you’re committed to paying them monthly. When it comes to fixed costs, generally aim to keep your monthly total no more than 50% of your take-home pay.

Tip: If you’re trying to make more room in your budget, evaluate this category and ask yourself if there are bills or subscriptions you could reduce or cancel entirely.

2. Financial Goals = 20% Of Paycheck

Consider putting at least 20% of your take-home pay toward important payments or contributions that will help secure your financial future or reach your Financial Goals. Three essential goals everyone should strive for are paying down credit card debt, saving for retirement, and building an emergency fund.

Tip: You can use our digital banking to automate your savings contributions and debt payments to make sure you’re saving consistently and that you don’t miss a payment.

3. Flexible Spending = 30% Of Paycheck

Budget no more than 30% of your take-home pay toward Flexible Spending. These are day-to-day expenses that vary from month to month, like eating out, groceries, entertainment, and gas. Just be sure to not go over your total flex budget each month.

Tip: To determine your flex-spending amount, subtract your fixed costs and financial goal contributions from your take-home pay (the amount that hits your bank account after taxes and any 401(k) contributions). In order to cut down on flexible spending, consider eating out less. Packing your lunch instead of eating out can save an average $1,500 a year!

Digital Banking Helps With Your Budget

We’ve got budgeting tools to get you started. Our spending tracker budgeting tool in digital banking enables you to understand your finances and spending habits. Create your own spending categories, set budget goals and deadlines, and track your progress. Watch the new digital banking Budgeting Tool tutorial here to get started.

When you spend your money with purpose, you’ll be on the road to changing your life.