paying off debt with payday loans

Want to Pay Down Your Loans? Understand the 50/30/20 Rule

Have you ever wished you could just get your finances in order already? For example, how can you pay down the payday loans? There’s only one way to accomplish this and you’ve heard it all before a thousand times. That’s right, you need to budget.

Your Loans and the 50/30/20 Rule

But how does one go about starting a budget? How can we apply it to our everyday lives and truly make it work for us? As it turns out, there’s a simple way to make your money work for you. A guideline that shows what your budget should look like and even how to execute it. I’m talking of course about the 50/30/20 rule.

There’s no one way to budget, but the 50/30/20 rule is simple and effective enough that it seems like the only way to do budgeting right. Let’s face it, we humans are prone to mistakes, but with a guideline to help, something as complicated as setting up a financial budget can be almost foolproof.

The 50/30/20 rule was originally introduced by Elizabeth Warren, a senior U.S. Senator from Massachusetts who specializes in bankruptcy law. As a solution offered to Americans who struggle with money, she proposed the 50/30/20 rule as a way of dividing up your income in three parts:

  • 50% - needs
  • 30% - wants
  • 20% - savings

Simple right? That’s why it works so well! It’s easy to follow and it allows you to take control of your total income with just three simple steps. But for the sake of this blog, let's dive a little deeper into the 50/30/20 rule and try to see if we can gain a better understanding of what’s meant by needs, wants, and savings.


While needs may vary among different people, we can all agree on several things that would easily fit into the needs category:

    • Shelter: We all need a place to lay our head. Whether you’re renting an apartment, paying on your own home, or shacking up with a roommate, you need money to pay the rent/mortgage every month. This is perhaps the most core need we can all agree on.
    • Transportation: No matter where you live, you’ll need money to get from point-A to point-B. Whether you take the bus, the subway, or if you have wheels of your own to get you where you need to go, you need money to move around. Cars require gas, insurance, and the occasional maintenance check. Buses and subways require that you pay a fee to ride. Even bicycles need occasional care that requires money.
    • Utilities: Utilities cover a variety of things we all need; gas, water, electricity, internet, cable, and even cell phones all fit together in this category. You won’t go too far in life without any of these things (except maybe cable). Even the internet and cell phones are quite essential these days.
    • Insurance: Whether you’re covering your car, home, health, or your life, insurance is necessary enough to be considered a need. You can’t even legally drive a car without insurance. Home insurance is very necessary since your home is the most valuable asset you have. Life insurance is necessary when you have children or loved ones to leave behind. And health insurance, well, that goes without saying.

    • Credit: Many would argue over this one, but the fact is, we all have loans to pay back. You need a mortgage loan to pay for your home. You need an auto loan to pay for your car. And yes, you need credit cards to cover a lot of stuff in between. It’s a double-edged sword sure. But it’s necessary for most people.

Remember, it’s easy to get confused about what’s considered a need. For example, housing is a need. But a 5-bedroom, 3-bathroom mansion is not. Also, an auto loan is a need, but not when you’re using it to pay for a Mercedes. It’s important to consider how you’re approaching these needs and to only stick with the basics. Rule of thumb: always live within your means and never try to live large when you’re working in the electronics departments at the local Target.


Wants are just that, things you want (but can live without). However, wants can get pretty confusing too. For example, I may consider a weekend-vacation a ‘need’ if months of the Monday thru Friday grind are leaving me feeling the ‘need’ for a break. But my partner may disagree and say we can go without the vacation this year. Is a long-overdue vacation a ‘need’ or a ‘want’? You decide. But for most instances, wants are pretty clear-cut:

  • New clothes
  • Entertainment media: movies, games, records, etc.
  • Hobbies
  • Gym membership
  • Online subscriptions
  • Magazine subscriptions
  • Starbucks
  • Tattoos and jewelry
  • Restaurants and bars

These are just a few of the things that safely fit in the wants department. I know what you’re thinking, “but Starbucks is a need!” We all need our caffeine kick in the morning, but believe it or not, there are more affordable ways to fuel up than pulling up to the corner Starbucks. Can anyone say, Mr. Coffee?


Though it might the smallest piece of the budget pie, it happens to be the most important. Saving money is absolutely necessary if you want to keep your finances on the up and up. You need to save money for several reasons:

    • Retirement: One day, you’re going to retire. Hopefully sooner than later, but that all depends on how much you’re able to save in the coming years. You won’t be able to work forever, and you’re going to need to be able to support yourself without a job. Social security helps a little, but it’s not nearly enough to cover all your post-career expenses. Ask your employer if they offer 401(k) benefits. This is the most common way to save for retirement and it’s easy too. Start saving up now, so you can have a brighter future to look forward to.
    • Unexpected emergencies: Always expect the unexpected. As you may have guessed by now, things rarely go according to plan and sometimes, having extra money in the bank is a great way to combat those unexpected scenarios that seem to play out at the worst possible times.
    • Home repair: Your home is the most valuable asset you have. Take care of it. You never know when something is going to break in your home that can’t wait around for you to get the money to fix it; leaky roof, pest infestation, broken appliances, broken A/C unit, etc. These are just some things that could go wrong within your home that only money can fix.
    • Car repair: Your car is your only source of transportation. You need it to get to work, to your son’s baseball practice, to pick up groceries, etc. If your car breaks down, you can’t afford to wait to get it fixed. It won’t be long before your boss begins to wonder if you’re coming in to work. Having money saved up will allow you to get your fixed now so you can get things rolling again! Are you starting to see why saving money is important?
    • Rainy days: Rainy days are basically just days when things are going wrong. Not quite as extreme as an unexpected emergency, but it’s in the same vein. If you’re having a rainy day (a bad day), having money in the bank could clear up the dreary skies.

    • Security: Overall, having money saved brings security. It’s just nice to know that if something goes wrong, you have the money to turn it around.


Pie chart for 50/30/20

How Will the 50/30/20 Rule Save You?

Use these simple guidelines to get started on your journey to financial wellness today. It’s easy and very, very effective. You could even speak to your employer about using your direct deposit to split your income into different accounts. This could help make the budgeting process a little easier for you. But if you happen to run into a financial emergency before you’ve had a chance to build up your savings, you could always reach out to for "payday loans near me" for quick and easy financial relief options like South Carolina payday loans. Good luck and happy budgeting!

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.

Louis Tully

Louis Tully is a full-time finance writer offering financial expertise to everyday consumers. He understands the core values of finance and used his writing talents to share his own experiences with money to his readers. His articles teach how financial failures can easily become successes by making new habits and creating realistic goals.