Budgeting & Debt
The 50/30/20 split
Each bucket is a fixed share of take-home pay.
The Formula
Needs = Income x 0.50; Wants = Income x 0.30; Savings = Income x 0.20
Each bucket is a fixed share of take-home pay.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| I | Monthly income | currency | After-tax income for the month. |
| N | Needs | currency | Half of take-home pay. |
| W | Wants | currency | Thirty percent of take-home pay. |
| S | Savings | currency | Twenty percent of take-home pay. |
What Each Symbol Means
Icurrency
Monthly income
After-tax income for the month.
Ncurrency
Needs
Half of take-home pay.
Wcurrency
Wants
Thirty percent of take-home pay.
Scurrency
Savings
Twenty percent of take-home pay.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate a budget page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate A Budget, filed under Finance. Every number the guide produces comes from substituting into this one line.