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How to Budget More Efficiently: The 50/30/20 Rule

Written by Jack Rayner

17 Jan 2023


Budgeting, Personal finance, Savings

4 min read

Are you thinking about watching the pennies at the moment?

Here’s one budgeting method that could help you save in the long term without making it complicated: the 50/30/20 spending rule.

What is the 50/30/20 rule?

The 50/30/20 rule is a simple budgeting method that can help you to manage your money effectively, simply, and sustainably from payday.

All you need to do is split your spending into three ‘pots’: 50% for needs, 30% for wants and 20% for savings, or paying off debts.

With these three spending categories, you might find it easier to keep track of how you’re spending and to make sure you’re still saving towards your savings goals – whilst still paying for the things that make you happy in life!

Spending 50% of your money on ‘needs’

Needs are those things in life we all have to pay for and the essentials we can’t avoid, these can include:

  • Rent/Mortgage
  • Utility bills
  • Food shopping
  • Transportation.

Spending 30% of your money on ‘wants’

With the less exciting payments sorted, you can start to see where your money can go for your own pleasure. These will differ from person to person, but they might include:

  • Going out for food/drink
  • Clothes shopping
  • Entertainment subscriptions (Netflix, Spotify etc.).

Spending 20% of your money on ‘savings’

With 80% of your income now gone, the remaining 20% can be stashed away in your savings account. Or, if more suitable, this money could be used to pay off any current debts or repayments.

Putting away 20% of your monthly income every month will really start to add up in the long run and build a savings plan without the fuss. This method could help towards various things, including:

  • Emergency/rainy day pot
  • Saving for a house
  • Buying a car
  • Holidays.

Like the idea of this? Why not give the 50/30/20 a go next payday and see where your savings could take you?

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