There are many ways to manage your finances and stay on top of debt, but not everyone can do it. A vast majority of people struggle with budgeting, saving money, and paying off debt. To be successful in the future you must become financially literate by picking up a few skills that will help you create a solid financial foundation for yourself.

The “save money or pay off debt calculator” is a tool that helps people budget, save money, and pay off debts easily. The tool also includes an estimate of how much it will take to pay off the debt.

One of the numerous personal financial rules of thumb is the 50/30/20 budget.

If you’re new to budgeting and need answers to issues like “how to save money while you’re broke,” this easy budgeting strategy is ideal. or “what percentage of your income should go toward debt repayment, savings, and investments?”

Personal finances are just that: private. Everyone’s scenario is unique, but there are enough parallels to make budgeting principles like the 50/30/20 or the 30/30/30/10 effective in the majority of cases.

What is the 50/30/20 Rule in Budgeting?

The 50/30/20 budget plan entails allocating 50% of your after-tax income to necessities (Needs), 30% to wants (Wants), and the remaining 20% to debt reduction and savings.

Senator Elizabeth Warren and her daughter, Amelia Warren Tyagi, proposed this guideline in their book “All Your Worth: The Ultimate Lifetime Money Plan.”

The following is how it works:

To begin, figure out how much money you have after taxes each month. This is the amount of your paycheck left over after taxes and social security deductions.

If you have pension (401k) or health insurance deductions, bring them back in as they are in our 50-30-20 budget calculations.

Now, divide your funds as follows:

Essential Needs: 50% of your Earnings

Plan to spend no more than 50% of your take-home salary on non-essential daily living costs, such as:

  • a place to live (rent and utilities)
  • Groceries
  • Transportation
  • Insurance
  • Minimum monthly debt payments, such as credit card and school loan installments
  • Personal hygiene and clothing
  • Healthcare
  • Childcare

Budgeting is a process of calculating your requirements against desires. Needs are the absolute necessities for you to live from day to day, according to the 50/30/20 budget guideline.

Clothing does not include, for example, the brand new Italian leather shoe you bought to keep up with the newest fashion trends. Also, just the bare minimum of debt payments is considered a need.

30 percent of your income is spent on wants

Yay! After all, your life isn’t going to be that bad! Plan to spend 30% of your after-tax income on luxuries such as expensive Italian shoes, holidays, movies, eating out, gym membership, pets, cable TV, and other non-essentials.

Debt repayment and savings account for 20% of your income.

At least 20% of your income should be used to pay off debt and put money aside for the future.

I said earlier that as part of your 50 percent allocation for necessities, you should make the minimum payments on your debt. The 20% of your budget is dedicated to paying off your debt as quickly as feasible.

Making merely the minimal payments on a credit card, as you may be aware, may result in you being in debt permanently as your interest rates increase.

You must set aside 20% of your after-tax income to pay off debt and save money in your emergency fund and retirement accounts.

In the idea of paying oneself first, you might re-arrange the 50/30/20 rule as 20/50/30.

50-30-20 Budget Rule

Example of a 50/30/20 Budget

Assume your monthly salary is $4,000 per month. According to the 50/30/30 guideline, you should budget for:

  • $2,000 for necessities (needs).
  • $1,200 is what I’m looking for.
  • $800 in debt and savings

The percentages are the maximums you can spend on necessities and desires, but the minimums you can spend on debt and savings, in my opinion.

It’s feasible, for example, that you may spend less than $1,200 on eating out, travel, mobile phone bills, cable TV, and other non-essentials.

If you can reduce your discretionary spending to $700 per month (for example), you may use the leftover $800 to beef up your ‘needs’ budget, pay off debt quicker, or increase your emergency fund saves.

To estimate your monthly income, you might use the Nerd Wallet’s 50/30/20 budget calculator.

Is the 50/30/20 Rule a good fit for you?

The 50-30-20 budget guideline is straightforward, making it simple for those who aren’t interested in lengthy spreadsheets or minute budget calculations.

That being said, life isn’t always easy. What if your requirements are significantly more than 50% of your take-home pay? You can’t merely pay your bills half-heartedly.

If you do, you may face consequences such as foreclosure on your house, a drop in your credit score, and the loss of your vehicle.

You may need to drastically reduce your costs and look for new methods to create money in order to manage your critical spending.

There are several situations in which the 50/30/20 budget may not work right away. These are some of them:

1. Living in an HCOL Place: Making the 50-30-20 rule work in a city where the cost of living is exceptionally high and your income is below average may be difficult.

It is recommended, for example, that your housing expenditures do not exceed 30% of your take-home salary. If you’re paying a lot more, it’s time to think about moving, downsizing, or getting a roommate.

The same may be said of child care. Using this guideline to budget might be challenging if daycare fees are really high.

2. High-Interest Debt: Making minimal payments will not enough if you have large credit card debt.

With credit card interest rates as high as 20% or more, it makes no sense to store your money in a savings account paying 1% APR while your debt interest charges continue to rise.

Learn how to use the Debt Snowball and Debt Avalanche repayment tactics to pay off your debts.

3. Aiming for FIRE: If you want to retire early, you’ll probably need to put away a larger portion of your income. It is fairly uncommon for people in the FIRE movement to save up to 70% of their net income.

4. High-Income Earners: Assume a monthly income of $20,000 after taxes. You may spend $6,000 each month on non-essentials if you follow the 50/30/20 guideline (wants). This seems to be a significant sum of money to spend on discretionary items such as eating out or cable.

Of course, what you spend your money on is ultimately up to you, but it’s worth noting that the 50/30/20 ratio may need to be tweaked for higher-income individuals.

50/30/20 Rule vs. 50/30/20 Rule

The 50-30-20 guideline does not have to be adhered to rigidly. Finally, I’ll mention a few more budgeting guidelines and practices that you may find beneficial.

1. 30/30/30/10 Budget Rule: This rule states that you should spend 30% of your take-home salary on housing, 30% on utilities, food, and childcare, 30% on debt repayment and savings, and 10% for entertainment and other desires.

This budget strategy divides housing into its own category, allowing you to concentrate on avoiding spending more than 30% of your income on it.

2. The 30.10/60 Rule: Here, you spend 30% on necessities, 10% on desires, and 60% on savings and debt reduction. This budget is designed for those who want to get out of debt rapidly while simultaneously investing for retirement.

3. Zero-based Budgeting: Popularized by Dave Ramsey, zero-based budgeting is a budgeting approach in which your income minus spending equals zero, and each dollar is assigned a name.

Because you are accounting for every single dollar on your pay stub far before you get it, this is a detailed method to budgeting.

A zero-based budget, when combined with a cash envelope method, may be quite effective.


It’s critical to locate the sweet spot that works for you when it comes to budgeting success.

Choose a proportionate budget that allows you to save/invest, pay off debt, fulfill daily commitments, and yet have fun!

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The “paying off debt calculator” is a tool that allows users to input their personal information and find out how much they can save by paying off debt. It also gives them the option of finding out how long it will take before they are completely debt free.

Frequently Asked Questions

Is it better to pay off debt or save money?

A: It depends on the situation. If you are in debt and can pay your loans back within two years, it would be better to go ahead with paying off your debts quickly because then it will take less time for you to save money. In this case, saving the money is not necessary so long as you have enough saved up by the end of two years.

What is the fastest way to budget to get out of debt?

A: If you need to budget, the best way is to look at your expenses and figure out where you can cut back. However, if thats not possible for whatever reason, then I recommend trying a debt consolidation loan.

How can I pay off debt quickly and save money?

A: Personal debt is a serious issue for many people. You can pay off your debts in the following ways, which will save you money as well as reduce interest charges that accrue over time.

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