Even as a kid, I was fascinated by money. Not in some greedy way, but in the way you’d be drawn to something mysterious and powerful. I loved how it looked, how it folded into my wallet just right, and even the sound it made when you crinkled a few bills together. Honestly, I can still remember that distinct smell of a fresh, crisp bill. To this day, it sticks with me more than any bank statement ever has. I’m sure you’ll agree.
Looking back, I’ve always had a unique relationship with money. I guess you could say I was born a saver. That doesn’t mean I don’t spend… I do, especially on things that matter to me. But I’ve never been the type to blow cash on cheap, throwaway junk just because it’s there. I like quality. I like things that last. Sure, there’s a time and place for “crappy” stuff, but if it’s not something I really care about, I’m not wasting my dollars.
One of my favorite early memories? My grandmother giving me my very first checkbook. I thought I’d made it. I was maybe seven years old, sitting there filling out pretend checks and deposit slips while updating the cash ledger like I was managing some Fortune 500 account.
That little checkbook felt like the key to the grown-up world – and in a lot of ways, it was the start of a lifelong respect for managing money with intention.
The Simple Rule That Changed the Way I Think About Money
Years ago, when I was still learning the ropes of finance, I sat across the table from a Wall Street veteran who had seen just about everything. Market crashes, bull runs, shady IPOs, and startups that went from garage to global in a few years. We weren’t talking about complex financial instruments or tax shelters. Instead, he leaned in, looked me dead in the eye, and said:
“You want to win in money? Master the 50/30/20 rule first.”
At the time, I thought he was joking. I mean, this guy managed several hundred millions. But he was dead serious… and he was right. I didn’t know it then, but that simple budgeting framework would become a core philosophy not just in my personal life, but in how I teach clients to manage their money, run their businesses, and build financial futures worth bragging about.
Today, I want to break it down for you… what it is, how it works, and why it’s one of the most underrated tools in both personal finance and business growth.
What Is the 50/30/20 Rule (And Why Should You Care)?
The 50/30/20 rule is a framework for managing your income in a way that builds both stability and freedom. It divides your income into three buckets: 50% for Needs, 30% for Wants, and 20% for Savings or Debt Reduction.
But let’s pause there. If you’re a business owner, you might be thinking, “That sounds like personal finance stuff.” And you’re right – it starts there.
However, the discipline behind this model translates beautifully to business finance too. We’ll get to that in a moment. First, here’s how it works in real life.
Say you earn $10,000 per month. You’d allocate $5,000 toward essentials like rent, food, insurance, and utilities. Then $3,000 would go toward lifestyle expenses… dining out, hobbies, travel, maybe even that espresso machine you “needed.” Finally, $2,000 would be earmarked for saving, investing, or paying down debt.
That last part – the 20% – that’s where the magic happens. That’s your growth engine. And in my experience, both personally and professionally, that’s the bucket most people ignore until it’s too late.
Why I Use This in My Own Life (And Why You Should Too)
The truth is, I didn’t always follow this model. In my early career, I was like most entrepreneurs – focused on reinvesting every dollar back into the business. I was proud to live lean, hustle hard, and “bootstrap” everything. But over time, I realized something: I was building a business, not a life.
When I finally applied the 50/30/20 rule to my personal finances, things started to click. I built a strong emergency fund. I maxed out my retirement accounts. I had the freedom to take calculated risks because I had a financial cushion underneath me.
It also gave me the clarity to teach clients how to approach their own finances with a better strategy, not just surviving tax season, but preparing for decades of financial wins.
The Business Application: Scaling Smart, Not Just Fast
Now, let’s shift the lens to your business.
What if you applied a similar framework to your company’s finances? You’d start by identifying the “needs” of your business – fixed expenses like rent, salaries, software, insurance, and taxes. That’s your 50%. These are the non-negotiables, the things that keep the lights on.
Then, your “wants” – that’s your 30%. Think upgraded equipment, travel to conferences, team retreats, marketing experiments, and even investing in nicer branding. Things that aren’t essential to survival… but enhance the experience and growth potential.
Finally, the 20% – your savings and future investments. In business, this might be setting aside funds for expansion, unexpected downturns, or tax planning. It’s where retirement contributions, bonus pools, or investments in new business lines are born. And when you don’t plan for this, it doesn’t happen.
You wouldn’t believe how many business owners I’ve met who make $500,000 a year but have no plan to protect or grow that wealth. They spend what comes in, patch the holes at tax time, and repeat the cycle, year after year.
This is why a strategic budget model matters.
How the 50/30/20 Rule Supports Better Tax Planning
Here’s where things get interesting for someone like me… a tax strategist. When you build your personal and business finances around a consistent structure like 50/30/20, you create opportunities for smart, proactive tax moves.
For example, let’s look at the 20% “savings” category. That money can be funneled into a Solo 401(k) or SEP IRA, dramatically reducing your taxable income. On the business side, setting aside money for bonuses or capital expenditures before year-end can shift your tax profile in a big way.
Even the “wants” category has room for strategic planning. That conference you attend in Vegas? That could be a tax-deductible trip… if you document it right.
That new website revamp? Marketing expense. The key is not just spending – it’s knowing where each dollar goes and how it works for you in the long run.
The structure gives you clarity. And clarity gives you control.
Why This Rule Helps Prevent Financial Burnout
Let’s be honest. Entrepreneurship can feel like a treadmill that never turns off. There’s always a new goal, a new risk, and a new tax bill waiting around the corner.
When your money is disorganized, everything feels urgent. But when you follow a rule like 50/30/20, you build in breathing room. You know your basics are covered. You’ve carved out space to enjoy life. And you’ve given yourself permission to build real, lasting wealth.
You don’t need a six-figure income to start doing this. In fact, starting with less makes you more disciplined. I’ve seen clients shift their financial futures by applying this rule at $4,000 a month – and then scale it up as their business grows.
A Quick Reality Check (And an Important Reminder)
Let’s not pretend this rule fits every situation perfectly. If you live in a high-cost city like San Francisco or New York, your “needs” might creep up beyond 50%. If you’re aggressively paying off debt, maybe that eats more into your savings. And that’s okay.
This isn’t a rigid formula, it’s a starting point. The power lies in the intentionality behind the numbers.
Most of the successful business owners I’ve worked with didn’t get there by winging it. They had a plan, they stuck to it, and they adjusted as life evolved. That’s what this rule encourages structure with flexibility baked in.
The Tax Strategist’s Takeaway
The 50/30/20 rule might sound like elementary budgeting advice, and that’s the beauty of it. Simple doesn’t mean ineffective. In my world, it’s the simple things done consistently that create long-term wealth and tax efficiency.
You don’t need to be a Wall Street wizard to master this. You just need a framework and the discipline to follow it.
Whether you’re just getting started or bringing in seven figures, this rule can anchor your finances and steer you toward smarter decisions. And if you’re thinking this sounds too basic to help your business – think again.
The most successful clients I work with? They build from frameworks like this and layer complexity only when it adds value. If you want to see how we can help you build the best possible future, feel free to reach out for a free consultation.
Welcome to the New Age of Accounting. Let’s begin.
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
