So many things can distract you from achieving your goals — especially goals centered around saving money. Conflicting objectives like traveling more versus growing an emergency savings account or simply reaching for too many goals at once can spread your saving and budgeting efforts thin.

The 50-30-20 budget is an alternative to traditional, and sometimes complicated, budgeting methods. Sen. Elizabeth Warren, D-Mass., helped create this simpler approach to budgeting — and many financial experts have come to embrace it as a practical money-management strategy.

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How the 50-30-20 Budget Works

With so many competing wants and needs in your life — such as buying a home, paying off debt, traveling the world — it can be difficult to determine how much money to save for different goals. Some personal finance experts promote austerity measures or using complicated budgeting tools or budgeting worksheets to manage your money. But the 50-30-20 rule reveals how simple budgeting can be.

Make Your Money Work for You

In her book, “All Your Worth: The Ultimate Lifetime Money Plan,” Warren and her co-author and daughter, Amelia Warren Tyagi, provide a straightforward and actionable solution for how to make a budget. With the 50-30-20 budget you divide up your after-tax income, or net pay, into the following three ways.

50 Percent for Needs

Allot half of your net pay for needs. Needs include any expenses you cannot forgo in a given month, including:

Rent or mortgage

Groceries

Minimum payments on credit cards

Auto loan payments

30 Percent for Wants

The 30-percent category might be the most surprising part of Warren’s budgeting rule, as a significant portion of your income is allotted to nonessentials. Wants include expenses such as:

Going out to dinner

Traveling

Concert tickets

20 Percent for Savings and Debt

Saving money and paying down debt — which so many personal finance experts emphasize as a priority — takes the smallest portion of the 50-30-20 budget. The 20-percent category includes:

Make Your Money Work for You

Emergency fund savings

Retirement savings

Extra payments toward debt

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Balancing Wants and Needs

Elle Kaplan, CEO and co-founder of LexION Capital Management, shared why Warren’s rule makes so much sense. “By following a clear strategy and automatically diverting a portion of each paycheck, you save effortlessly without feeling deprived by having a constant focus on budgeting and penny-pinching,” Kaplan said.

Applying the breakdown to your paycheck makes it easy to create your budget. If your paycheck comes out to $3,000 per month after taxes, your budget would look something like this:

$3,000 x 0.50 = $1,500 for needs

$3,000 x 0.30 = $900 for wants

$3,000 x 0.20 = $600 for savings and debt

Warren’s 50-30-20 rule supplies concrete benchmarks for saving and definitive guidelines for how to make a make a budget while also giving you room for options. Instead of feeling punished by a restrictive budget, the 50-30-20 rule gives you extra wiggle room to enjoy your hard-earned money while still accomplishing what you need to do for the present and future.

Make Your Money Work for You

Success Using Elizabeth Warren’s 50-30-20 Rule

Putting any budget into action can sound difficult, especially when it comes to determining what kinds of purchases are considered needs versus wants. For example, you might need groceries, but you don’t necessarily need a bag of Doritos. Ultimately, you have to make choices in how you categorize each purchase so you don’t exceed your budget categories.

Using the 50-30-20 rule can make the process of applying those budget categories to your everyday decisions easier. Lauren Bowling — the creator of Financial Best Life, a personal finance and lifestyle site featuring money-saving and budgeting tips — uses Warren’s 50-30-20 budget to live a fulfilling life in a city notorious for being expensive.

“When I was 24 and living on my own for the first time in New York City, I had no idea what the appropriate amounts were for spending,” Bowling said. “I think this is what a lot of young people struggle with when creating budgets. If you’ve never been out in the world, how do you know what is, or isn’t, normal or acceptable?”

Bowling figured it out with the help of the 50-30-20 rule and was able to pay off a debt in excess of $10,000 using this method in just a single year while living in New York.

“I think a lot of people struggle with ‘savings guilt’ — at least I know I did for a while,” Bowling said. “I felt like I had to be saving some massive amount or paying off all my credit cards, and if I didn’t, that made me a failure. The 50-30-20 rule not only makes sure you aren’t spending all your money on fun or living expenses, but it also makes sure you are saving something for a rainy day; 20 percent really isn’t that much for debt repayment and savings.”

At its root, Warren’s rule is a guide for how to create a budget. Deciding how to balance your budget in a way that sufficiently covers your needs and wants is up to you — and having that ability to make choices is what could make the 50-30-20 rule the most effective budget plan for your financial goals.

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