The 50/30/20 method is the most well-known budget rule in the world and also one of the most effective because it is simple without being naive. It was popularized by Harvard academic and senator Elizabeth Warren in her book "All Your Worth": divide your after-tax income into three categories — needs (50%), wants (30%), and savings/debt (20%). You do not need a spreadsheet with 40 categories. Just three.
Needs are expenses you cannot eliminate without serious consequences: rent or housing payment, utilities (water, electricity, gas, internet), basic food, commuting to work, mandatory insurance, minimum debt payments. If this number exceeds 50% of your income, you have a structural problem — you are living more expensively than your income allows. The solution may require big changes: changing housing, refinancing debts, changing jobs. Reducing this number is the priority.
Wants are expenses that improve your quality of life but are not strictly necessary: eating out, streaming subscriptions, clothing beyond the basics, hobbies, travel, gym, entertainment. This category is not "guilty spending" — it is the reason you work. But it has a limit. If you are consistently above 30% on wants and below 20% on savings, long-term goals become unachievable. 30% is the ceiling, not the target.
This 20% does the heavy lifting over the long term. It divides into two priorities: if you have high-cost debt (credit cards, informal loans), put everything here until they are paid off. Once free of expensive debt, distribute between emergency fund (until complete), medium-term savings goals, and finally long-term investing. Order matters: emergency fund first, expensive debt next, long-term investing once the above are covered.
Monthly net income of $3,000,000: needs up to $1,500,000, wants up to $900,000, savings/debt minimum $600,000. Income of $5,000,000: needs up to $2,500,000, wants up to $1,500,000, minimum savings $1,000,000. Income of $8,000,000: needs up to $4,000,000, wants up to $2,400,000, minimum savings $1,600,000. If 50% is not enough for your actual fixed costs, that is the first number you need to change — by increasing income or reducing fixed costs, not by cutting the 20% savings.