The 50/30/20 Rule Explained

If you're looking for a simple way to manage your money without feeling overwhelmed, the 50/30/20 rule is a great place to start. It's a budgeting method that helps you divide your income into three easy-to-follow categories: needs, wants, and savings.

Let’s break it down and show you how it works using some real Aussie examples.

What is the 50/30/20 Rule?

The 50/30/20 rule is a budgeting framework that divides your after-tax income like this:

• 50% for Needs – essential expenses like rent, groceries, bills, transport

• 30% for Wants – lifestyle choices like dining out, streaming services, hobbies

• 20% for Savings & Debt Repayment – savings, emergency funds, extra debt payments

It’s simple, flexible and works well no matter your income level.

For example:

Let’s say you're earning $75,000 per year. After tax, that’s roughly $59,000 per year, or about $4,900 per month (based on 2025 ATO rates).

Here's how the 50/30/20 rule could look:

50% Needs – $2,450/month

• Rent or mortgage: $1,800

• Groceries: $500

• Utilities: $150

• Transport (petrol, public transport): $200

30% Wants – $1,470/month

• Eating out & takeaways: $300

• Subscriptions (Netflix, Spotify, etc.): $50

• Gym membership: $60

• Shopping & entertainment: $300

• Travel savings: $760 (or more if you're planning a trip)

20% Savings/Debt – $980/month

• Emergency fund: $300

• Extra mortgage repayments or credit card debt: $400

• Long-term savings or investments: $280

Why It Works

• It gives you structure without being too restrictive.

• You still get to enjoy life while building savings.

• It’s adjustable – if your rent is high, you can tweak your wants temporarily.

Final Thoughts

The 50/30/20 rule is not about being perfect—it’s about having a simple guide to help you make smarter choices with your money. Whether you’re saving for your first home, paying off a credit card or just trying to make ends meet, this method can help you feel more in control.