The 50/30/20 rule is a budgeting rule created as a guideline on how to use your income. It considers your take-home income and splits it in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment.
Needs – 50%
50% of your income should go towards necessities (i.e. needs). Up to half of your money is fixed on the non-negotiable aspects of living which you cannot avoid paying out for, such as mortgage/rent, household bills, and groceries.
Wants – 30%
30% goes towards desirable purchases (i.e. wants). Examples include purchasing a TV, clothing, video games etc.
Savings & Debt Repayment – 20%
20% goes into a savings or debt repayment (either retirement, emergencies, or a particular financial goal). You may opt for more than 20% towards savings, which could benefit you in the long run. But any less, and this may mean a longer saving period towards reaching your financial goals.