Budgeting Basics | The 50/30/20 Rule

Are you a teen or a young adult prepping to get your first real paychecks from a new job this summer? Tap in with us for some Budgeting 101 pro tips and make sure you know the basics about managing your money!

Have you ever gotten some money from a part-time job, allowance, or birthday, and then wondered where it all went? You're not alone! Learning to manage money, especially when starting a job for the first time, might not seem super important now, but starting early sets you up for success later. You don’t need to be a finance expert to get it right - there are some simple rules of thumb to follow when thinking about making the most out of your paycheck. Not sure where to start? Let's take small steps and start off with a simple rule of thumb for smart money management, the 50/30/20 rule.

The 50/30/20 rule is a super-easy way to think about how to spend and save your money, no confusing spreadsheets needed. It just means breaking your money into three parts:

50% – Needs

Half of your money goes toward necessities. Everyone's definition of "needs" is different, but think along the lines of things that help you live safely, comfortably, and do your job or go to school. These are the must-haves—the things you can’t skip without facing a serious problem. This could include:

• Gas or bus fare to get to school or work

• Food like lunch and basic groceries

• Phone bill (if you pay for it)

• School supplies

• Professional Clothes

• Helping your family with rent
  

Even if your parents or guardians cover most of these essentials, it’s good practice to understand what “needs" are and how to prioritize them.

30% – Wants

This part is for fun—the extra stuff that makes life more enjoyable but isn’t essential for survival or your responsibilities. Wants aren’t bad. Making space for fun and creativity is important for mental well-being. The key is setting limits so you can enjoy things now and plan for the future. Some examples include:

• Eating out with friends

• Subscriptions (like Spotify, Netflix, Uber, YouTube Premium, etc.)

• Trendy clothes, shoes, or accessories

• Entertainment like movies, concerts, or festivals

• Gaming, hobbies, or hanging with friends

• Coffee shop runs, snacks, or special treats
  

This 30% gives you permission to enjoy your money and reward yourself for your hard work, without going overboard. It’s all about balance. Tracking your "wants" spending can help you stay within your limit and avoid dipping into your savings or skipping out on needs.

20% – Savings (and Debts, if any)

The last 20% goes toward building your future and protecting yourself from surprises. Even small savings add up over time, and starting early gives you a head start. If you owe any money—like to a friend, a family member, or a credit card—you can use this portion to pay that off too. Here’s how this section can work:

• Saving for a big goal like a car, college, or a trip

• Building an emergency fund for unexpected expenses (like a phone breaking or losing a job)

• Paying off any debts (credit cards, borrowed money, etc.)

• Setting aside money for things like holiday gifts or future expenses

Think of this as your “future you” fund. By saving consistently—even if it’s just a little—you gain freedom, reduce stress, and put yourself in a better position to reach your goals. If you don’t have any debt yet, that’s great—this is your chance to stay ahead of the game.

Why Does it Matter

Budgeting might sound like something only people with bills and mortgages need to worry about, but the truth is, the earlier you learn to manage your money, the better off you’ll be.

• Budgeting teaches you control, not restriction- Budgeting isn’t about saying “no” to everything fun, it’s about being in charge of your money instead of wondering where it all went.
  

• It helps you reach your goals- Want to save up for a car? A concert? College? Budgeting helps you plan your money so that you get there. Without a budget, it’s easy to spend on small things and never have enough for the big stuff.

• It gives you freedom- Oddly enough, budgeting frees you to enjoy your money more. When you know your essentials are covered and your savings are growing, you can spend your “wants” money guilt-free.
  

Budgeting isn’t about being boring or cheap. It’s about being smart and in control. The earlier you start, the easier it gets,  and your future self will seriously thank you.