Skip to main content

The 30% of the 50/20/30 Rule

In a previous post, I outlined the basics behind the 50/20/30 budgeting rule. In this post, we will take a closer look at the 30% of that rule. 

30% for “wants” 

In the 50/20/30 budgeting rule, 50% of your after-tax income should be allocated to your “needs” or basic living expenses, 20% of your after-tax income should go to savings, and the remaining 30% should be available for your “wants” or entertainment. Keep in mind, this is the “catch-all” category: it’s important to first set aside 20% of your income to savings and make sure your needs are limited to 50% of your income and only spend the remainder on your wants.  Wants are things that you don’t absolutely need to survive and can include items such as: dining out, entertainment, vacations, hobbies and subscriptions. Here are some key tips to help you keep your wants category limited to 30% of your income.  

  • Determine your “wants budget” each month 

Take a few minutes prior to the start of each month to estimate the amount you can spend on your wants by taking your estimated after-tax income and multiplying the total by 30%. You can go even further by dividing the total by 4 to estimate your weekly wants budget. Just knowing this estimate before starting each week will give you a better idea of how much you have available for your wants.  

  • Don’t misclassify your wants 

A common mistake people make is to categorize wants as needs. For example: Although a car is considered a need for transportation purposes, the optional bells and whistles that come with a car purchase are not.  

  • Pause before making purchases 

With online shopping, it’s very easy to make impulse purchases and quickly see your total spending grow out of control. One way to curb impulse buys is to simply pause and give yourself 24 hours before making a purchase. Taking this extra time removes the emotions and gives yourself time to consider how much you really want the particular item. After sleeping on it, you may realize more often than not that you don’t have the same urge to purchase the item.  

  • Prioritize items that matter most 

Since resources are limited, it’s important to prioritize items that matter most to you. Make a list of things you enjoy doing for fun. Limit your wants to the items that bring you the most joy and don’t waste your money on items that don’t add a lot of value to your life. Sift through your subscriptions and automatic payments and cancel any subscriptions that you no longer use or enjoy. 

  • Consider buying second-hand 

Whether it comes to cars, clothes, tools, or other household items, purchasing brand new goods comes at a premium. Depending on the item you’re purchasing, buying second-hand may be a great way to save a significant amount of money on your wants. Consider the items you purchase on a regular basis (particularly big-ticket items) and determine whether the premium that comes with purchasing new is worth it for you.  

Budgeting doesn’t have to be complicated: often it’s simple steps that we take consistently that have the biggest impact on our wallets. Try implementing these tips each month to help you easily keep your wants to 30% of after-tax income. 


About the Author

Nicole Harris is a full-time tenured accounting and business faculty member at Green River College as well as the Program Director of the Bachelor of Applied Science Degree in Applied Management Program. Nicole graduated from the University of Washington Master of Professional Accounting program with a concentration in taxation. Upon completing her master’s degree, Nicole continued her career in career in public accounting at Sweeney Conrad, LLP. She was later recruited by one of the 4 largest public accounting firms in the nation, KPMG. KPMG offered a much more challenging work environment and diverse clientele. At KPMG, Nicole focused her work on corporate taxation, large partnership compliance work, research and development credit studies and various tax consulting and provision projects.

Profile Photo of Nicole Harris, CPA