The 60/20/20 rule: a 60 20 20 budget with examples

What the 60/20/20 budget says

The Penny Hoarder describes three parts of monthly take-home pay, which it defines as what is left after taxes, retirement contributions and pre-tax benefits:

• 60% for needs. Rent or mortgage, utilities, basic groceries, transportation, insurance, child care and minimum debt payments.
• 20% for savings or debt. Savings goals, or payments on debt above the minimum.
• 20% for wants. Dining out, streaming, travel, hobbies.

The hard part is the line between a need and a want. Groceries are a need, but the steak dinner at home may be a want. The rule does not draw that line for you.

Where the 60/20/20 rule comes from

The page we read does not say, and we found no named author or year. So it is a rule of thumb. One published plan lands in the same place on needs: Fidelity's Plan Your Pay (January 2026) says to keep needs to no more than 60% of take-home, with 30% for wants and 10% for near-term goals and emergency savings. Fidelity adds 15% of pay before tax for retirement, and calls its numbers goals, not hard rules.

A worked example on $5,000 a month

The Penny Hoarder gives $5,000 as one of its examples: $3,000 for needs, $1,000 for wants and $1,000 for savings. The arithmetic:

If your rent, utilities, groceries, insurance and minimum payments come to $3,400, you are $400 over on needs. Per The Penny Hoarder, you would trim wants before you shrink savings.

60/20/20 calculator

Type your take-home pay. Add a partner's to see each person's amounts and the household's.

The 60/20/20 rule for a couple

Take-home pays of $5,200 and $3,400 add up to $8,600. Sixty percent of that is $5,160 for needs, with $1,720 for savings or debt and $1,720 for wants. Each person can also run it alone: $3,120, $1,040 and $1,040 on the $5,200 pay, and $2,040, $680 and $680 on the $3,400 pay.

Shared needs are where it gets tricky. Our guide on splitting bills by income uses $3,000 of shared bills as its example. Split 50/50, each person pays $1,500, which is about 29% of the larger pay and 44% of the smaller one. Split by income, it is about $1,814 and $1,186, the same 35% of each pay. TD Bank says 50/50 works well when both earn similar amounts and suggests a proportional split when they do not. Since needs are the biggest slice of this rule, how you split them decides how much room each person has left.

When the 60/20/20 budget doesn't fit

• Expensive cities. The Penny Hoarder says even 60% may be too low for needs there.
• Significant debt or irregular income. The same page says the split may need adjusting.
• Very tight cash. It points to the 70/20/10 rule for that case.
• You want to see every charge. It is less granular than zero-based budgeting, which gives every dollar a job.