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The 50 30 20 rule is a simple budgeting technique, which you can use to plan how much you spend and save.
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.
To get a better idea of how the 50 30 20 rule works, here are some useful examples.
If your monthly income is £1,800 after-tax, a 50 30 20 budget would work out at:
You can use the table to see how a 50 30 20 budget might work for you, based on your monthly salary.
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.
The 50 30 20 rule means that you should save 20% of your salary after tax.
In a cost of living crisis, 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 come in really handy.
To help you prepare for the unforeseen, it’s a good idea to save up a few months of rent or mortgage payments.
You can use our savings calculator to help you plan how much you should save each month to reach your goals.
The 50 30 20 rule can make budgeting a little easier. But you still need to keep track of your finances to stick to it. Here are some tips to help you stick to the 50 30 20 rule.