Is the 50/30/20 budget rule realistic anymore?

Personal Finance

Everyone recommends 50% needs, 30% wants, 20% savings. But my rent alone is 40% of my take home pay and I live in a modest apartment in a normal city (not NYC or SF). By the time I pay rent, utilities, car insurance, groceries, and gas Im at like 75% just on needs. Is this rule outdated or am I doing something wrong?

John Smith

3 Answers

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The 50/30/20 rule was created when housing was 25% of income. Its outdated for current reality.

Adjusted for 2024:

Needs: 60-65% (housing costs have exploded)

Wants: 15-20%

Savings: 15-20%

Or honestly, just focus on:

Pay your bills

Save something (even 10% is fine to start)

Dont go into debt for wants

Ways to improve your situation:

Can you get a roommate? Cuts housing significantly

Can you reduce car costs? (Insurance shopping, paid off car)

House hack if possible (rent a room, ADU, etc)

Increase income (side gig, job hop for raises)

Youre not doing anything wrong. Housing costs have outpaced wages massively. The fact that youre aware and trying to budget puts you ahead of most people. Adjust the percentages to YOUR reality, not some arbitrary rule from 20 years ago.

Sarah Taylor

That rule assumes 1970s housing costs. These days 60/20/20 is more realistic for most people in MCOL or HCOL areas. The important thing is youre saving SOMETHING consistently, not hitting arbitrary percentages.

Rachel Martinez

I think the better approach is to work backwards. Decide minimum savings rate (even if just 10%), pay your bills, whatevers left is "wants". Dont beat yourself up about percentages.