The 50/30/20 rule: how to split your income the All Your Worth way, and what to do if it doesn't add up

What is the 50/30/20 rule?

It's a way to split your income into three parts without budgeting every single expense: half for what you have to pay no matter what, up to 30% for what you choose to spend and 20% for your future. Elizabeth Warren and her daughter, Amelia Warren Tyagi, present it in All Your Worth, published in 2005 by Free Press, as a way to balance your money between Must-Haves, Wants and Savings.

The book's appeal is that you don't need to track every penny or keep complicated budgets to get your money in order: you just need those three parts in balance. Today, public financial education agencies in several countries use it as a starting point, with some differences between them.

Sources for this part:Simon & Schuster, All Your Worth, Consumer Financial Protection Bureau (CFPB, Estados Unidos), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España)

How do you work out the 50/30/20 rule?

It's based on your net income: what reaches you after taxes and deductions, not the salary on your contract. The CFPB, the US consumer financial protection agency, talks about your take-home pay, and Finanzas para Todos, Spain's financial education plan, about net monthly income, the money that actually lands in your pocket.

An example with round numbers: if 2,000 reaches you each month, the rule suggests 1,000 for needs, up to 600 for wants and 400 for savings. If 1,200 reaches you, that's 600, 360 and 240. Do the math with your own net income and in your own currency.

Before you split anything, it helps to know where you stand. The CFPB suggests tracking everything you spend for a month to see where your money goes, and Finanzas para Todos suggests doing it for two or three months before applying the rule.

Sources for this part:Consumer Financial Protection Bureau (CFPB, Estados Unidos), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España), All Your Worth

What counts as a need and what counts as a want?

Needs are the costs you'd have to pay even if you didn't want to. The CFPB includes housing, food, clothing, transportation, utilities and child care. Mexico's Condusef mentions rent, food, transportation, education and health, and Finanzas para Todos adds insurance.

Wants are what makes life better but could be cut if needed: eating out, the movies, trips or hobbies. The line isn't always clear, and the CFPB notes that people sometimes find these rules hard to apply to their own lives: groceries are a need, but a snack from the corner store is a want. Decide your criteria once and apply them the same way every time.

Sources for this part:Consumer Financial Protection Bureau (CFPB, Estados Unidos), Condusef, Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (México), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España)

Where do debts go in the 50/30/20 rule?

This is where the versions disagree. The CFPB puts credit card and loan payments in the 20%, together with emergency and retirement savings. Finanzas para Todos, on the other hand, counts debts within the 50% for needs.

A practical way to sort it out: the minimum payment each debt requires goes with needs, because you can't skip it, and whatever extra you pay to finish sooner counts toward the 20%. Any approach works if you're consistent; what matters is not counting the same payment twice.

Sources for this part:Consumer Financial Protection Bureau (CFPB, Estados Unidos), Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España), All Your Worth

What if your basic costs take more than 50%?

It's very common, especially on a low income or in cities where rent is expensive. The rule comes from a book written for American families and doesn't fit every budget: if rent, food and transportation already take 70% of what you earn, forcing a 50% makes no sense.

Finanzas para Todos says it plainly: it's a starting point and you should adapt it to your needs. If your savings are below 20%, start lower and raise them little by little; if wants go over 30%, set priorities. The CFPB also encourages you to create your own rule for your situation.

An example with round numbers: with a net income of 1,000, if the essentials cost 750, one possible split is 750 for needs, 150 for wants and 100 for savings. It's your version, not the book's, and it's worth more than a rule you can't keep. When your income goes up or a fixed cost goes down, move closer to 50/30/20.

Sources for this part:Finanzas para Todos, Plan de Educación Financiera (CNMV y Banco de España), Consumer Financial Protection Bureau (CFPB, Estados Unidos), All Your Worth

How to do it in Oslo

Oslo doesn't make you fit into three boxes: it lets you set a monthly amount for each category and shows you how much is gone. Go to More, Your money, Budgets, or tap “My budgets” on Today, and enter an amount under “Per month” for each category. It's always per month, whatever day you get paid.

For your 50/30/20, add things up yourself. Needs are your obligations, such as rent, utilities or your phone, your debt payments and the budgets for Groceries, Transport, Home and Health. Wants are categories like Food, Fun and Clothing. And savings are your goals, where you tap “Log savings” on payday.

Then Today does the rest: “Where it went this month” compares each category with its budget, and the big figure on Today (“You have” once your income is logged, “In your accounts” before that) already takes out what's due before your next payday and what's budgeted but not spent yet, as you can see in “Why do I have this available?”. If you tell Oslo how much you earn, it lets you know on Today when your budgets add up to more than that. Budgets are unlimited on the free plan. Seeing each one month by month comes with the Personal plan.

Sources for this part:All Your Worth