About

This free Budget Calculator is designed to help you manage your personal finances efficiently. It’s based on the 50/30/20 rule, which was popularized by Elizabeth Warren. It divides your net monthly income into three categories:

1. 50% for Needs: Essential expenses like rent, mortgage, home utilities, groceries, transport and insurance.
2. 30% for Wants: Discretionary spending such as dining out, entertainment, and travel.
3. 20% for Savings and Debt Repayment: Future financial security, including savings, investments, and the reduction of outstanding debts. This could include credit card debt, student loans and other personal loans.

How to Use the Budget Calculator

1. Enter Your After-Tax Monthly Income: Input your net salary and any other net income.
2. List Your Monthly Expenses: Categorize your spending into needs, wants, and savings/debt repayment.
3. Calculate and Review: Click the calculate button to see a breakdown of your budget.

Try it below:

Benefits of the 50/30/20 Strategy

The main advantage of this tool is its simplicity. You don’t need to spend hours analysing your budget. You can just quickly see how close you are to these broad guidelines. Seeing the numbers might encourage you to start tracking your expenses in more detail which tends to automatically have a positive effect on the way you spend your money.

I like to use 22seven for this which I believe is the best budgeting app in South Africa. I recently also heard of FinWise which sounds like a strong competitor. It can handle multiple currencies which makes it suitable for international use.

History of the 50/30/20 Budget Rule

The 50/30/20 budgeting rule was popularized in 2005 by Elizabeth Warren, a prominent American academic and politician, and her daughter Amelia Warren Tyagi in their book “All Your Worth: The Ultimate Lifetime Money Plan”. Elizabeth was a professor specializing in bankruptcy law at Harvard Law School at the time. She later became a U.S. Senator and presidential candidate.

The rule was developed based on her extensive research into personal finance and bankruptcy. It’s rooted in her observations of common financial behaviours and pitfalls, as well as her professional understanding of financial law and consumer protection. It has since gained widespread acceptance and is often recommended by financial advisors for its simplicity and effectiveness in helping individuals establish healthy financial habits.

The aim of this rule is to create a balanced approach to personal budgeting that accommodates immediate living expenses, personal fulfilment, and financial future-proofing. This makes it accessible for a wide range of income levels and lifestyle needs. By simplifying financial planning into these three broad categories, the 50/30/20 rule helps people gain clearer insights into their spending patterns and make informed decisions about their financial priorities.