By Gabriele Denaro · Published 20 September 2026 · Updated 6 October 2026
The rule was popularized by Elizabeth Warren and Amelia Warren Tyagi in their 2005 book All Your Worth. It splits your after-tax income into three buckets: about 50% for needs, 30% for wants and 20% for savings and extra debt repayment. It is a rule of thumb that is easy to remember and easy to check yourself against.
On a net income of €2,000 a month the rule suggests roughly €1,000 for needs, €600 for wants and €400 for savings. Needs are the costs you must pay to live and work: rent, groceries, utilities, transport to work, insurance and minimum debt payments. Wants are what makes life nicer but could be cut: eating out, hobbies, travel, subscriptions.
Plenty of things sit between the two. A phone plan, a gym, a coffee on the way to work. The exact label matters less than being consistent and honest about it. If you cannot decide, split the item: the basic plan is a need, the premium upgrade is a want.
In an expensive city rent alone can take half your income, and on a low income the 20% may be out of reach. That does not mean the rule failed. It tells you something: if needs are at 70%, the useful question is whether to lower them or raise income, not how to hit 50 exactly. The rule is a sanity check, not a rulebook.
Measure what you actually save as a share of income and compare it with 20%. The calculator below splits an income into the three buckets and lets you move the amounts to see how the others adapt, so you can try a split that suits your situation before changing anything in real life.
General educational information, not personal financial, tax or legal advice. It may be incomplete or out of date. Terms of use.