The 50 30 20 rule

The 50 30 20 rule is a simple budgeting technique, which you can use to plan how much you spend and save.

What is a 50 30 20 budget?

A 50 30 20 budget divides your monthly income after tax into three clear areas.

  • 50% of your income is used for needs.
  • 30% is spent on any wants.
  • 20% goes towards your savings.

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 investment. And as the cost of living rises, it’s more important than ever to have a clear budget in place.

How can I apply 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.

Needs

All the essentials you need to pay each month. They’re usually the largest payments you have to make, which is why they make up the largest percentage. They might include:

  • Mortgage or rent – usually your biggest outgoing.
  • Groceries – the basics, such as bread, milk, fruit.
  • Utilities – energy bills, including gas, water, electric.
  • Insurance – for things like your car, home or even life.
  • Minimum borrowing repayments – on any credit cards or loans.
  • Commuting – costs for travelling to and from work.
  • Maintenance fees – think child support.

Wants

Your wants are non-essentials that you would prefer to spend your money on but could manage without, such as:

  • Days out
  • Non-essential groceries
  • Subscriptions
  • Restaurants
  • Gigs or festivals
  • Holidays.

Savings

Your savings are for rainy days, unexpected expenses or investing for the future.

Extra repayments on your credit cards and loans also fall into this category as they help you pay off existing debt and future interest.

Your 50 30 20 monthly budget breakdowns

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:

  • Needs - £900
  • Wants - £540
  • Savings - £360

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.

Other useful thoughts on the 50 30 20 rule

  • 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.

    • Spending Insights – the Lloyds  Bank Mobile Banking app can help you gain a clear picture of your finances.
    • Top budgeting tips – sound financial advice to help you stay on top of your payments and spending.
    • 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. 
    • Reduce your savings – in lean times like a cost of living crisis, it may become harder to stick to 50 30 20. If so, you’ll find it easiest to reduce your savings – after all, your needs come first, and you still want to be able to enjoy life with wants. The 50 30 20 rule wasn’t invented to make people feel bad, so if you have to reduce your savings for a while, that’s okay.

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