Looking for a simple way to manage your budget without overthinking it? The 50/30/20 rule is probably the most effective and easiest method to apply. In three numbers, it transforms your relationship with money.
Popularized by US Senator Elizabeth Warren in her book All Your Worth, the 50/30/20 rule is a method for splitting your budget into three main categories:
It's simpler than you'd think. Here are the 3 steps:
| Net salary | 50% — Needs | 30% — Wants | 20% — Savings |
|---|---|---|---|
| £1,400 | £700 | £420 | £280 |
| £1,800 | £900 | £540 | £360 |
| £2,200 | £1,100 | £660 | £440 |
| £2,800 | £1,400 | £840 | £560 |
| £3,500 | £1,750 | £1,050 | £700 |
💡 Tip: Set up an automatic transfer of 20% of your salary into a savings account on payday, starting today. What you don't see, you don't spend.
The key distinction of this method: knowing whether an expense is a need or a want.
That's the case for many people, especially in cities where rent is high. If so, adjust the ratios gradually:
The key is to always save something, even 5%. A small regular saving beats a large irregular one.
Yes. Adapt the percentages to your situation. Start with 60/25/15 or 70/20/10 if you need to. What matters is having the three categories, not the exact percentages.
A budgeting app makes tracking far easier. My EasyBudget lets you categorize your spending into needs and wants, and see your three envelopes in real time.
No — you always work from your net salary (after tax). Taxes are deducted at source and aren't part of your available budget.
Create your spending categories, track your envelopes in real time and save automatically. Free to get started.
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