Did you know, according to the FCA, 34% of adults in the UK have either no savings or less than £1000 in a savings account? Budgeting and saving doesn’t need to be complicated, the 50-30-20 rule is a straightforward, easy way to manage your money each month, carry on reading to find out how it works and how it could benefit you.

WHAT IS THE 50-30-20 RULE?

The 50-30-20 rule is a useful budgeting guide to help you manage your spending effectively. The rule is that you split your monthly income into three spending categories; needs, wants, and savings. Knowing exactly how much to spend on each category will make it easier to stick to your budget, and help keep your spending in check.

Needs – 50% of your income towards essential living expenses such as bills, food, rent/mortgage, and transportation.

Wants – 30% of your income on non-essential expenses such as eating out, shopping, holidays, and subscriptions.

Savings – 20% of your income towards putting money into a savings account, paying any outstanding debts, or a pension fund.

Of course, this budget may be different for everyone (your budget and how much your spending in each category depends on what you consider to be essential) If you find that your spending doesn’t fit into the 50-30-20 rule, perhaps your needs exceed 50% of your budget and that’s okay. You may be able to make some changes to reduce those expenses like switching energy provider or trying a different shop for cheaper groceries but cutting back on needs can be a challenge.

 Instead, start looking at your ‘wants’ and ask yourself “can I live without this?” for example, a gym membership that you no longer use but still pay for, an entertainment subscription, or perhaps those new trainers you’ve had your eye on. The more you reduce the spending on your ‘wants’ the more money you can put towards your needs or savings target.

Example: John and Lisa have 2 children and a mortgage to pay for with a combined monthly income of £4,000. That leaves them with:

£2000 on needs

£1,200 on wants

£800 on savings

John and Lisa decide they want to increase their savings to be able to afford a family holiday. To do this, they choose to cut down on takeaways saving them £100 a month, John cancels his old gym membership saving £30 a month, and Lisa reduces the amount she is spending online shopping saving another £70 a month. That’s a total of £200 cut back and saved per month just from reducing their wants together.

Little changes can add up and make a big difference, take a look at your own direct debits, subscriptions and monthly spends on eating out/takeaways to determine what’s necessary and see how much you can save.


To use the 50-30-20 rule, you must calculate the 50:30:20 ratio based on your income each month. Here’s how it works:

1.) Calculate your after-tax income for the month.

Add up how much you receive to your bank account each month by looking at your payslip if you are employed, if this varies month to month then work out an average for the past 3 months.

2.) Categorize your spending.

Next, multiply your take-home pay by 0.50 (50% for needs), then multiply by 0.30 (30% for wants) and 0.20 (20% for savings). This will show you ideally how much you should spend in each category.

3.) Plan your budget around these numbers and stick to it!

Now that you know how much of your money will be going towards your needs, wants, and savings, you can start adjusting your budget where needed to help stick to the 50-30-20 rule going forward


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