In the 50-30-20 rule, 50% of your income should be spent on which category?

The 50-30-20 rule is a popular budgeting guideline that helps individuals manage their finances effectively by categorizing their income into three different areas: needs, wants, and savings. According to this rule, 50% of your after-tax income should be allocated to needs. Needs are essential expenses that are necessary for survival and well-being, such as housing, utilities, food, healthcare, and transportation.

Allocating half of your income to needs ensures that you can cover your essential living expenses without jeopardizing your financial stability. This approach emphasizes the importance of prioritizing basic necessities before spending on discretionary items or saving for future goals.

The other categories—wants and savings—are also crucial but are allocated smaller percentages, with wants taking up 30% and savings 20%. By following the 50-30-20 rule, you can create a balanced financial plan that supports both current living requirements and future financial goals.