What is the 80/20 budget rule, and could it work for you?

As you’re working on growing your savings and reaching your long-term financial goals, it’s important to have a clear plan for your money. But many people give up on budgeting because it feels overwhelming.

Enter: The 80/20 budget, which is designed to help you build healthier habits without the pressure of strict tracking.

Here’s a closer look at how the 80/20 budget works and whether it’s right for you.

What is the 80/20 budget rule?

There are many different budgeting strategies, each structured differently to suit your preferences, spending habits, and goals.

The 80/20 budget is a flexible budgeting strategy that essentially takes the 50/30/20 method and simplifies it even further. It also incorporates the concept of “pay yourself first.”

Here’s how it works: 20% of your take-home pay (your earnings after taxes, health insurance premiums, and any other expenses are taken out of your paycheck) goes towards savings, investments, and extra debt payments. The remaining 80% of your net income goes toward your expenses.

Pros and cons of the 80/20 budgeting method

If you’re thinking about following the 80/20 budget rule, consider these pros and cons first.

Pros:

Simplicity: The biggest advantage of the 80/20 budget is how easy it is to set up and follow. You save 20% of your income and spend the remaining 80% without having to categorize every purchase or track dozens of budget lines. This simplifies budgeting for beginners who may not be ready to dive into a complex budgeting spreadsheet just yet.
Pay yourself first: With the 80/20 method, you immediately set aside 20% of your income for savings, which can include your emergency fund, employer-sponsored retirement account, and even extra payments toward debts. This helps build a strong savings habit and ensures you’re on track to reach your long-term financial goals.
Flexibility: Because the 80% spending portion of the budget isn’t broken down into categories, you have freedom to adjust your spending naturally from month to month without reshuffling your entire budget.

Cons:

Less visibility: The 80/20 budget doesn’t provide a detailed breakdown of where your money is going. This can make it difficult to pinpoint the areas where you may be overspending.
Aggressive saving: While saving 20% of your income is a healthy goal to work toward, that may not be feasible with your current income and expenses. If you put too much money into savings right away, you could end up with a monthly cash flow shortfall.
Doesn’t prioritize multiple financial goals: If you're juggling retirement, emergency savings, a house fund, and debt payoff, this method doesn’t help you decide how to split the 20%, which could end up slowing your progress.

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Who should follow the 80/20 budget?

The 80/20 budget is as simple as it gets. It’s a great starting point for those who are new to budgeting, or who want to prioritize saving without too many restrictions.

“This rule works if you don’t want to track your expenses line by line each month,” said Linda Rapisardo, CFP®, founder and financial planner at Canela Wealth. “If you hit your 20% savings goal, you can spend the rest guilt-free.”

That said, the 80/20 budget isn’t for everyone. This method doesn’t give you much visibility into how you’re actually spending the 80%, which can make it easy to overspend in certain categories without realizing it. And people who struggle with impulse spending or want more structure may find it isn’t detailed enough.

“For many people, this isn’t something you can flip on overnight,” Rapisardo said. “I always recommend reviewing a few months of real expenses to see what’s realistic for you.” Once you have a better idea of what your spending and savings patterns look like, you can begin transitioning toward an 80/20 breakdown.

Additionally, setting aside 20% of your income toward savings may not be realistic at first. But don’t be discouraged if you need to save less. “You don’t need to start at 20% — you just need to start,” Rapisardo advised. “From there, you can work your way up to that 20% by being more intentional with how you spend.”

If you have a consistent income and good self-control, the 80/20 budget can be a good choice because it gives you clear guardrails without overcomplicating the budgeting process.

On the other hand, if you struggle with overspending or your essential expenses (such as rent, groceries, childcare, etc.) exceed 80% of your income, you might need a more detailed approach, such as the envelope budgeting method or zero-based budgeting.

Ultimately, it’s important to choose a budgeting method that aligns with your financial lifestyle and personality.

“There are so many budgeting methods out there,” Rapisardo said. “The best one is the one that works for you. Find one that you can be consistent with and automate it.”