Step Two: Limit Your Needs to 50 Percent of Your After_Tax Income. Now go back to your budget. How much do you spend on "needs" each month, things like groceries, housing, utilities, health insurance, car payment, and car insurance? According to Warren and Tyagi and their 50ቺተ rule, the amount that you spend on these things should total no more than 50 percent of your after_tax pay.
If you can't forgo a payment such as a minimum payment on a credit card, it can be considered a "need," according to the Warren and Tyagi. Why? Because your credit score will be negatively impacted if you don't pay the minimum. By the same token, if the minimum payment required is ษ and you regularly pay 贄 a month to keep a manageable balance, that additional ๛ isn't a need.