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The 50 30 20 rule

You might find the 50 30 20 rule a helpful way to think about and manage your spending. Find out how it works and how it can help you as the cost of living rises.

Man working

The 50 30 20 rule

You might find the 50 30 20 rule a helpful way to think about and manage your spending. Find out how it works and how it can help you as the cost of living rises.

What is the 50 30 20 rule?

The 50 30 20 rule is one budgeting method to help you plan your spending.

  • 50% of your income goes on needs.
  • 30% goes on wants.
  • 20% goes on savings.

The rise in the cost of living has made managing finances more important than ever. Times are hard for many, and it might not be easy to think about savings.  You can stick to these percentages strictly if that works for you, or take a more flexible approach depending on your needs and circumstances.

The key is making sure you can cover your essential costs, buy some of the things you want, and try to put some money into savings regularly.

How to make the 50 30 20 rule work for you

To make the 50 30 20 rule work for you, it’s important to know what category your spending falls into – needs, wants or savings.

Needs

These are the essentials. The expenses you can’t avoid or manage without. They include:

  • Mortgage or rent
  • Basic groceries
  • Utility bills
  • Maintenance fees
  • Minimum repayments on borrowing products
  • Commuting
  • Insurance

Wants

Wants are non-essential expenses. These are the things you choose to spend money on, but you could manage without if you had to. For example:

  • Days out
  • Non-essential groceries
  • Restaurants
  • Holidays
  • Subscriptions
  • Gigs

Savings

Savings are handy for unexpected expenses and to cover needs that happen annually, including:

  • Car repairs
  • Home repairs
  • Essential home appliances
  • Medical expenses
  • Vehicle servicing
  • MOT
  • Road Tax
  • TV Licence

Also, while minimum repayments are considered ‘needs’, extra repayments on loans or credit cards are considered savings because they reduce existing debt and future interest.

50 30 20 rule example

As an example, if your monthly income is £1,500 after-tax, following the 50 30 20 rule that would break down into:

  • Needs: £750
  • Wants: £450
  • Savings: £300

The table below shows how much you could save each month if you follow the 50 30 20 rule, depending 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

    Hopefully, this gives you an idea of what the 50 30 20 rule looks like. This budgeting method can be helpful for those who:

    • Want to spend more mindfully
    • Aren’t sure where their money is going
    • Want a new way to manage money

    If you tick any of those boxes, let’s see how to make the rule work for you.

Keeping track of the 50 30 20 rule

So, how do you stick to the 50 30 20 rule? It can be tricky, especially if you’re on a lower budget. And the cost of living crisis is only going to make it harder.

Don’t be hard on yourself if you struggle to stick to 50 30 20 exactly – just do what works for you, as long as it means you’re able to save a little on a consistent basis.

Here are some ideas to make life easier and keep within the 50 30 20 rule. 

  • Keep a record – note down your savings and what you spend on debt repayments.
  • Use the money management features of your Halifax Mobile Banking app – whether it’s Spending Insights or Open Banking, get a better overall view of your finances.
  • Make saving a habit - if you go off track with your savings one month, try not to repeat it the next month. The sooner you’re able to get back on track, the better.
  • Be realistic – don’t give yourself a hard time if at certain times of the year, like the festive period, you end up saving less for a month or so. You certainly wouldn’t be the only one.
  • Plan ahead – look out for any warnings about upcoming bill increases.
  • Reduce your saving plan – depending on your budget, it simply might not be possible to put 20% into savings each month. If it’s only possible to do 5%, stick to that instead. The rule is designed to make you more aware of your finances and keep closer track – not to make you feel bad.

Why is it important to have savings?

It might be tempting to spend more on wants when you have a saving pot behind you, but savings are useful for so many reasons.

  • Starting on and climbing the property ladder
  • Unexpected costs, like car repairs or broken home appliances
  • Weddings
  • Birthdays
  • Short-term goals
  • Retirement
  • Giving you a sense of security

Savings are also useful to cover time lags. For example:

  • Putting a deposit down on a new flat could overlap with getting the deposit back for the flat you’re in at the moment.  
  • Covering an insurance claim or paying the excess for a claim.

If possible, it’s good to aim for at least a few months of rent or mortgage repayments in savings, in case the unexpected happens. Hopefully, you’ll never need it, but having some savings could be reassuring as a financial buffer.

With price rises, think about saving a little extra when you can. Our savings calculator could help.

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With the rising cost of living, we have the tips and tools to help you manage your money. Whether you are budgeting, borrowing, saving or supporting others we're here to help.

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Managing your money

With the rising cost of living, we have the tips and tools to help you manage your money. Whether you are budgeting, borrowing, saving or supporting others we're here to help.

Help manage my money