How to create a simple 50/30/20 budget

A simple 50/30/20 budget can help you stay on track to reach the financial goals you’ve set.

Here’s how you do it:

First, divide your after-tax income into three expense buckets: one for needs, one for wants, and one for savings.

Your “needs” bucket should take up about 50% of your income and include essentials like housing, car, utilities, health care, and minimum monthly debt payments.

Your “wants” bucket is for your larger non-essential purchases—for example a phone upgrade or a luxury vehicle—and should take up no more than 30% of your income.

Last but not least, your “savings” bucket should account for 20% of your income and include things like retirement accounts, investments, and emergency savings that’ll help you achieve a healthy financial future.

A simple 50/30/20 budget is easy to follow—and the peace of mind that you’re on the right financial path should give you the motivation to stick with it.