The 50/30/20 rule: how to build a budget you can actually stick to
The 50/30/20 rule is the best-known budgeting method because it fits in one sentence: half of what you earn goes to needs, 30% to wants and 20% to savings. Elizabeth Warren and Amelia Warren Tyagi popularised it in their book All Your Worth, and it has lasted because it doesn't ask you to track every category separately: just three numbers.
What goes in each part
- 50% needs. What you'd pay even if you lost your job tomorrow: rent or mortgage, building fees, utilities, groceries, transport to work, health and minimum debt payments.
- 30% wants. What you choose: eating out, delivery, clothes you don't need, trips, subscriptions, the new phone.
- 20% savings. Emergency fund, investments and any debt you pay above the minimum.
The rule applies to what you actually take home, after taxes and contributions: net pay, not gross.
An example with numbers
With a net income of 1,200,000 a month:
- Needs: up to 600,000.
- Wants: up to 360,000.
- Savings: at least 240,000.
If each person in a couple earns a different amount, apply the rule to each income separately, and the shared part comes out of what each person puts towards joint expenses; we cover how to split that in how to split expenses as a couple.
When 50% isn't enough
In many cities rent alone takes a third of your pay, and needs go past 60% without any excess at all. You're not doing anything wrong: the percentages are a starting point, not a grade. What matters is the order.
- Savings first: even if it's 10%, set it aside as soon as you're paid, not at the end of the month.
- Then needs, which are what they are.
- Whatever is left is for wants, and that's the number you adjust.
With high inflation there's one more nuance: savings that sit still lose value. The 20% only does its job if it goes into something that at least keeps up with prices.
Instalments: need or want?
It depends on what you bought, not on how you paid for it. Instalments on the fridge that broke down are a need; those on the new TV, a want. What instalments do change is that today's decision takes up room in the coming months: before adding one, check how much of your 30% is already committed. We explain how in how to keep your credit card instalments under control.
The step everyone skips: measuring
Nobody knows off the top of their head how much goes on "wants". Before setting percentages, track a whole month without changing anything, and only then compare against the rule. The first month isn't for cutting back: it's for finding out. If you've never kept it up for more than a week, start with how to start tracking your spending and not quit.
On Expenses you log each expense with its category and the app shows you the month's total and how it breaks down, with no spreadsheets or formulas. With that in view, knowing whether you're at 50/30/20 is a matter of looking at one screen. It's free and doesn't ask for card or bank details.