The 50/30/20 rule is a budgeting guideline that suggests how to allocate your after-tax income. The "50" in the rule represents the portion of your income that should be allocated to needs. This includes essential expenses such as:
- Housing (rent or mortgage)
- Utilities (electricity, water, gas, etc.)
- Transportation (car payments, fuel, public transport)
- Groceries and food
- Insurance (health, car, etc.)
- Minimum debt payments
Essentially, it encompasses all the necessary expenses you need to cover to maintain your basic quality of life. The remaining 30% is meant for wants, and the final 20% for savings and debt repayment.