A Guide to Making the 50:30:20 Budgeting Rule Work for You


The best way to get the most out of your savings is by breaking it down into bitesize pieces, however this can sometimes feel a little confusing or overwhelming when you don’t know how. One popular method used by many people is the 50:30:20 budgeting rule. This rule provides a simple yet powerful rule for managing your finances and achieving a balance between your spending and saving. In this blog, we'll explore how you can make the 50:30:20 budgeting rule work for you so keep on reading to find out more…

What does the 50:30:20 budgeting rule do?

The 50:30:20 budgeting rule is a straightforward formula that divides your income into three categories:


50% for Needs

This category covers essential expenses like your rent or mortgage payments, household bills and insurance.

Identify your non-negotiable monthly costs and allocate half of your income to cover these essential needs.


30% for Wants

The second category allows you to allocate money to those special treats that can improve your wellbeing and social life.

This portion of your income can go towards dining out, entertainment, shopping, and other non-essential expenses.


20% for Savings

The final category is dedicated to building your financial future. Allocate 20% of your income toward savings and investments

This portion helps you create an emergency fund and put money towards any of your saving goals such as your deposit or any larger financial goals.


How can you make it work for you?

Track Your Spending

Start by tracking your expenses to gain a clear understanding of where your money is going. A great way of doing this is by creating a spreadsheet where you can clearly see your income and your outgoings in one place.

Define Your Needs and Wants

It’s important to clearly distinguish between your needs and wants. Prioritise essential expenses and make sure that these are able to be comfortable paid off before addressing how much money you can spend on your wants and treats.

Adjust if you need to

Life can be sometimes unpredictable and often our financial situations can change without our own control. Don’t forget to keep checking in with yourself to make sure your saving plans are working efficiently and comfortably for your situation. Don’t be afraid to change your savings if you need to, remember that any saving is good saving!

Emergency Fund

It is important to building an emergency fund alongside your regular savings with the 20% allocated for savings. This will allow you to have a separate pot on hand for any of those unpredictable emergencies and unexpected expenses. This allows for your regular savings to remain protected at all times so that you can relax. (Nobody wants to cancel their dream holiday because their car broke down!)

Set Financial Goals

Use the remainder of your 20% savings category to set specific financial goals. Whether it's saving for a holiday, a deposit on a new home, or a wedding it’s important for you to have a clear goal to keep you motivated and saving.

The 50:30:20 budgeting rule offers a practical and flexible approach to managing your finances, allowing you to balance your needs, wants and savings. By understanding your financial priorities and making intentional choices, you can work towards financial stability and achieve your long-term goals in no time.