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The 50 30 20 rule
The 50 30 20 rule can be a useful way to plan your monthly budget breakdown. Read more about this rule and get helpful tips to help track your spending.
What is the 50 30 20 rule?
The 50 30 20 rule is a handy rule of thumb for breaking down your monthly income into the following categories:
- 50% of your money goes on your ‘needs’.
- 30% goes on your ‘wants’.
- 20% goes on your ‘savings’.
Like most money matters, you might want to be flexible with the percentages in case of a shock bill or other unexpected expense. But the 50 30 20 budget can be a useful guide for thinking about how you spend and save.
How to use the 50 30 20 rule
Look at your monthly outgoings and divide them into the three categories of needs, wants and savings, to see how much you’re spending in each.
What does your 50 30 20 budget breakdown look like?
If your monthly income is £1,000 after tax, this is how it would break down when you apply the 50 30 20 rule:
- £500 on needs
- £300 on wants
- £200 on savings.
You can use the table to see what the 50 30 20 rule might look like with different monthly take-home pay amounts.
-
Salary (after tax)
50% needs
30% wants
20% savings
Salary (after tax)
£1,000
50% needs
£500
30% wants
£300
20% savings
£200
Salary (after tax)
£1,500
50% needs
£750
30% wants
£450
20% savings
£300
Salary (after tax)
£2,000
50% needs
£1,000
30% wants
£600
20% savings
£400
Salary (after tax)
£2,500
50% needs
£1,250
30% wants
£750
20% savings
£500
Salary (after tax)
£3,000
50% needs
£1,500
30% wants
£900
20% savings
£600
When you divide your monthly funds this way, you might be able to spot patterns in your current spending that are stopping you from saving money.
You can use past bank statements to see whether you’re spending more on your needs or wants. Then you can decide what costs you can shift or reduce to be more in line with the 50 30 20 rule.
Perhaps higher bills are taking you over the 50% need mark, so you need to adapt your savings goals for the time being. Or you’re overspending on wants, such as monthly subscriptions, when you can make do without.
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