The 50/30/20 Rule — a One-Size-Fits-None Approach to Money


You’ve probably heard of the 50/30/20 rule; it’s the one that suggests divvying up your income into 50% needs, 30% wants, and 20% savings. Sounds pretty straightforward, right? Well, hold onto your wallets, because I’m about to break down why the 50/30/20 rule isn’t the money gospel you might think it is and why these one-size-fits-all financial “rules” can lead you away from financial abundance.

The 50/30/20 Rule: The Basics

The 50/30/20 rule made its debut thanks to Elizabeth Warren and Amelia Warren Tyagi in their book, “All Your Worth: The Ultimate Lifetime Money Plan.” It’s meant to be a quick and easy way to manage your money, breaking it down into three neat categories:

  1. Needs (50%): This chunk covers all the essentials — rent or mortgage, utilities, groceries, transportation, and minimum debt payments.
  2. Wants (30%): In the wants category, you get to enjoy the finer things in life — dining out, entertainment, travel, and any non-essential spending you desire.
  3. Savings (20%): The final slice of your income pie goes toward savings. This includes contributions to retirement, building up that emergency fund, and other investments.

On the surface, this rule seems like a money management superhero — it helps you make sure you’ve got your necessities covered, a little room for fun, and savings for a rainy day. But here’s the scoop on why it’s not be all it’s cracked up to be.

Why the 50/30/20 Rule Misses the Mark

Simplifying the Complex

First off, the 50/30/20 rule simplifies personal finance to the point of naivety. It assumes that everyone’s needs are the same, regardless of where they live or their unique life circumstances. But we all know that’s not the case. Housing costs can vary wildly depending on location, and what’s a “need” for one person might be a “want” for someone else. This cookie-cutter approach can leave folks struggling to make ends meet or feeling guilty about treating themselves.

Ignoring Your Money Goals and Values

Let’s talk about your money goals and values. We’re all different, and we all have different aspirations. Whether you’re saving for a dream vacation, launching a business, or going back to school, the 50/30/20 rule doesn’t account for those goals. It doesn’t respect the importance of aligning your spending with your values either. If you’re passionate about supporting local businesses or championing sustainability, following a rigid spending plan might have you shopping for the cheapest products and prices.

Disregarding Income Inequalities

Income disparities are real, folks, and the 50/30/20 rule doesn’t give them a second thought. It assumes that everyone can comfortably carve out 50% for needs, 30% for wants, and 20% for savings. But in reality, lower-income folks often struggle to make ends meet, let alone save. Meanwhile, higher earners might find themselves with buckets of cash in the “wants” category, leading to mindless overspending.

Ignoring Life’s Curveballs

Life has a funny way of throwing curveballs at us. Whether it’s starting a family, buying a house, or dealing with unexpected medical expenses, the 50/30/20 rule doesn’t have your back. When life happens, sticking to a rigid plan can leave you feeling stressed and unprepared.

I’ve yet to meet someone for whom the 50/30/20 rule actually works. Here are a couple of examples that are more typical:

Meet Olivia, a passionate entrepreneur determined to make her startup dreams a reality. Olivia brings in $6,000 each month, but the lion’s share of her income is devoured by her business, covering expenses like product development, marketing, and overhead costs totaling $4,500. With a remaining $1,500, Olivia can’t strictly adhere to the 50/30/20 rule. Her business demands substantial reinvestment for growth, which leaves her with limited personal funds for necessities, wants, or savings. Olivia’s entrepreneurial journey exemplifies how entrepreneurship calls for distinctive financial strategies that don’t always align with conventional rules.

Lily is a recent college graduate brimming with ambition and a heart to make a difference. Lily earns $2,500 monthly, but she carries a hefty burden of student loan debt. Her monthly loan repayments clock in at $1,200, significantly exceeding the 20% savings allocation suggested by the 50/30/20 rule. Lily is also eager to further her education by pursuing a certification course, which costs her $500 monthly. After covering essential living expenses, Lily’s discretionary spending margin is razor-thin. The 50/30/20 rule doesn’t neatly fit into Lily’s narrative because her financial priorities revolve around managing debt and expanding her skillset rather than adhering to the traditional savings route. Lily’s financial journey demands a tailored approach that emphasizes debt management and skill development as primary objectives.

The Pitfalls of One-Size-Fits-All Financial Rules

The problems with the 50/30/20 rule are just the tip of the iceberg when it comes to one-size-fits-all financial rules. Let me give you the lowdown on why these rules can leave you feeling as empty as a piggy bank after a shopping spree:

Your Uniqueness Matters

You’re as unique as a unicorn, and your financial journey should reflect that. What works for someone else might not work for you. Embrace your individuality and craft a financial plan that suits your needs and dreams.

Goals Drive Your Money Decisions

Your financial decisions should be driven by your goals, not a random budgeting rule. Whether you want to retire early, travel the world, or start a business, your money plan should be your trusty sidekick on your journey.

Flexibility Is Your Best Friend

Life is unpredictable, and financial flexibility is your secret weapon. Rigid rules can make it tough to adapt to life’s twists and turns, whether they’re exciting opportunities or unexpected challenges.

Finding Your Way to Financial Fulfillment

So, if the 50/30/20 rule isn’t the holy grail of financial management, what’s the game plan? Yes, there is a way to take control of your money, while cultivating an inner sense of financial freedom. Let me break it down for you:

1. Know Your Money Inside and Out

Start by getting cozy with your finances. Understand your income, expenses, debts, assets, and most importantly, your money goals. Be real with yourself about what matters to you.

2. Set Your Unique Goals

Figure out your short-term and long-term money goals. What do you want to achieve in the next year, five years, or even decades down the road? Having clear goals will be your North Star in this money journey.

3. Craft a Plan That Fits You (not a canned 50/30/20 configuration)

Instead of squeezing yourself into a cookie-cutter budget, create a holistic financial plan that matches your values and goals. Focus on spending your cash where it truly matters to you.

4. Beef Up Your Peace of Mind Fund

A Peace of Mind fund is your financial safety net. Aim to stash away whatever amount of money will truly give you financial peace of mind. And leave it alone.

5. Seek Expert Advice When Needed

It can be easy to rely on simple tools and rules of thumb like the 50/30/20 rule when you’re trying to go it alone. But if you truly want to custom plan that feels incredibly good, consider working with a money coach.

The 50/30/20 rule might look like the superhero cape of personal finance, but it’s time to unmask the myth. Following strict financial rules can leave you feeling unfulfilled and disconnected from your true financial goals and values. It’s time to take charge of your financial journey, make money decisions that resonate with your soul, and create a financial plan that’s as unique as you are. So, what are you waiting for? Let’s embark on this exciting journey to financial fulfillment together!



Jenny Whichello, Bliss + Wealth

On a mission to help the next generation of unstoppable women have blissful relationships with money while building wealth! Free resources @