The 50/30/20 rule is one of the simplest ways to bring order to your finances without becoming an accountant. The idea: split your net income into three buckets.

It isn't a TogetherExpenses invention: it's a personal-finance principle popularised by US economist and senator Elizabeth Warren, a Harvard law professor, together with her daughter Amelia Warren Tyagi in the book All Your Worth: The Ultimate Lifetime Money Plan (2005). It has been one of the most cited budgeting frameworks ever since. Here we simply explain it and show you how to apply it.

The three buckets

  • 50% needs — everything you can't do without: housing, bills, groceries, transport, health, insurance, loan payments.
  • 30% wants — what makes life enjoyable: restaurants, subscriptions, travel, shopping, hobbies.
  • 20% savings — what you set aside or use to reduce debt: emergency fund, goals, investments.

A concrete example

With a net income of €2,000 a month: €1,000 to needs, €600 to wants, €400 to savings. These aren't rigid rules: they're a reference point to see at a glance whether you're out of balance — for example if "wants" are eating half your income, or if you never quite reach the 20% savings mark.

Why it works

It doesn't ask you to track every cent, it just gives you three numbers to keep an eye on. It's simple enough to actually stick with over time — and it's consistency, not obsessive precision, that makes the difference in personal finance.

How to use it as a couple

For two people, the rule applies to the household's combined income. Add the two salaries, calculate the three buckets on the total, and classify each expense as a need, a want or savings. That way you can see whether, as a couple, you're keeping a healthy balance between living well today and building something for tomorrow.

A useful detail: a contribution toward a goal (a holiday, a home) is savings, so it falls into the 20% — even if the goal itself is a "want". The "wants" bucket kicks in when you actually spend that money, not when you set it aside.

From calculation to practice

Keeping the three buckets updated by hand is possible but laborious. TogetherExpenses automatically classifies every expense into needs, wants or savings and shows how close you are to 50/30/20 month by month, with a personalised tip on how to rebalance.