The 50/30/20 rule: the simplest budget you can set up today

It was popularised by Elizabeth Warren, a Harvard professor and later US senator, in her 2005 book. The idea is simple: instead of tracking every single expense to the cent, you split your take-home pay into three broad buckets. That alone is enough for most people to escape monthly financial chaos.

Its success lies in being brutally simple. It requires no apps, no infinite categories, no reviewing your spending history every night. You just need to know your net income and be honest about what is a need versus a want.

The 50% bucket covers genuine needs: rent or mortgage, groceries, health insurance, electricity, gas, internet and commuting costs. These are expenses you would pay even if you wanted to cut back, because you simply cannot live without them.

The 30% covers everything that makes life enjoyable but that you could cut back in a pinch: streaming subscriptions, meals out, the gym, non-essential clothing, travel or concert tickets. The point is not to eliminate it, but to keep it bounded.

The remaining 20% is sacred. It goes to your emergency fund until it is fully funded, then to investing or paying off high-interest debt. If you have loans at 8% or more, repaying them beats investing.

With Spain's median salary around €1,800 net per month, the 50% bucket would be around €900. In cities like Madrid or Barcelona, where rent can easily exceed €900, the rule needs adjustment. In that case, many experts suggest relaxing the needs bucket to 60% and reducing wants to 20%, while keeping the 20% savings target.

The rule is not rigid. It is a starting point, not a sentence. What matters is that you have a system, not that the system is perfect. If you manage to save 15% consistently over years, you are doing much better than average.

Use the savings calculator to simulate how much you would accumulate in 5, 10 or 20 years if you start setting aside that 20% every month. The numbers tend to be surprising.