60/20/20 Rule Calculator

Formula

To calculate the 60/20/20 Rule (B):

\[ B = I \times RR \]

Where:

$B$ is the 60/20/20 Rule ($)
$I$ is the Income After Tax ($)
$RR$ is the Rule Rate

What is the 60/20/20 Rule?

The 60/20/20 Rule is a budgeting guideline that suggests allocating 60% of your income to essential expenses, 20% to financial goals (like savings or debt repayment), and 20% to discretionary spending. This rule helps individuals manage their finances effectively by ensuring a balanced distribution of income.

Example Calculation

Let's assume the following values:

Income After Tax ($I$) = $50,000
Rule Rate ($RR$) = 0.60 (for essential expenses)

Using the formula:

\[ B = 50000 \times 0.60 = 30000 \text{ dollars} \]

The amount allocated for essential expenses is $30,000.