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The 50 30 20 rule
The 50 30 20 rule is a simple budgeting method, which you can use to plan out how much you should spend and save each month.
What is a 50 30 20 budget?
The 50 30 20 rule or budget divides your monthly income after tax into three clear areas.
- 50% of your income is used for needs. This can cover everything from bills to food shopping.
- 30% is spent on any wants. Think days out with your family, dinner at a restaurant or any holiday plans.
- 20% goes towards savings. This includes things like topping up your emergency savings fund or setting aside money for investments.
You might find sticking to the 50 30 20 rule is easier than some budget plans. Having only three categories to keep track of can save you valuable time and stress worrying about what to do with your pay.
It also gives a balanced structure between essentials, enjoyment and planning for the future.
How can I use the 50 30 20 rule?
First things first, you should work out which of the three categories your spending falls into. This can help you get the best out of the 50 30 20 rule. Take a look at each section below to see where your spending may sit.
What does your 50 30 20 budget look like?
To get a better idea of what your 50 30 20 budget may look like, here are some useful examples.
If your monthly income is £1,800 after tax, your 50 30 20 budget would work out at:
- Needs - £900
- Wants - £540
- Savings - £360
Your 50 30 20 monthly budget examples
You can use the table to get a better idea of how a 50 30 20 budget can work for you, based on different monthly salaries.
|
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 |
As you can see, the 50 30 20 rule works for any kind of budget. It’s particularly useful if you want to track your spending more closely, find new ways to manage your income or would like a clearer, more committed approach to saving.
Making the most of your 20%
Once you’ve paid off any existing debts and set up your emergency savings fund, it’s time to make your money work harder. Whether you want to save or invest, you can use the 50 30 20 rule to get the most out of your income. Explore the different options available to you, such as:
- Savings – having stability and flexibility in the short-term.
- Pensions – growing your money for the future.
- Investments – focusing on your mid to long-term goals.
Other useful thoughts on the 50 30 20 rule
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If you choose to follow the 50 30 20 rule, you should aim to save 20% of your salary after tax each month. Once you have paid off any existing debts, this can then be split across your saving pots, pensions and any other investments you may have.
It can be tempting to add less money to your savings, so you have more money for needs and wants. But it’s a good idea to keep plugging away at your goals, as savings can come into their own when times are hard.
For example, you may know your car is due its MOT. This is an annual need that you’d need to pay for. If your car fails its MOT and needs work, you may also have an unexpected expense to pay for. This is when savings can really come in handy.
To help you prepare for the unforeseen, it’s a good idea to try and save a few months of rent or mortgage payments.
Use our savings calculator to see how much you can start saving each month to reach your goals.
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The 50 30 20 rule can make budgeting a little easier. But you still need to keep track of your finances if you want to stick to the plan. Here are some tips that can help you stay consistent with a 50 30 20 budget.
- Spending Insights – the Lloyds Bank Mobile Banking app can help you gain a clear picture of your finances, so you know what money goes where.
- Be fair on yourself – sometimes it might not be possible to stick to the 50 30 20 rule, especially in the run-up to Christmas, or if something unexpected comes up like you need to repair your car.
- Be prepared – keep an eye out for any news reports on upcoming bill increases.
- Make a record – take note of your savings and how much your debt repayments cost.
Remember, the 50 30 20 rule is just one of many budgeting plans you can use to manage how you spend and save your money. So, it may not work for everyone. Likewise, if an unexpected expense knocks you off track for a given month, try not to let it get to you. You can always resume the plan in the next.
The most important thing is to find a budgeting method that works for you and your goals.
Looking for more budgeting tips and ideas?
Browse our other money management resources that can help you stay on track with your wants, needs and savings.
