Do you know how much you should be spending each month, and on what? Without a budget, it’s almost impossible. The 50-20-30 rule is a guide that can help you keep your spending in line with your savings goals. Getting into the habit of following the 50-20-30 rule in your twenties will make saving for big holidays, a car or a house much more simple later in life. Whether you’re in college, working full time or part time you can use this budget system to gain control of your finances.

The rule can be customised around your own unique expenses and goals. Of course, you can tweak it but stay as close as possible to the rule will ensure you save money and live within your means.

So how does it work?

50 – “Your needs”

50% of your income goes to the essential things in your life that you “need” in order to survive. Food, accommodation (rent), car and/ or transport, mobile phone, utilities and groceries. These expenses tend to be the same month on month and are things you know you will have to pay.


20 – “Your savings”

20% of your paycheck each month should go directly into savings. Your savings should be paid for only after your needs, but before anything in the last category. Put the money in a savings account, so you don’t even think about spending it on anything else. Savings can be for a holiday, a car, repaying loans, or if your really ambitious, retirement (Yikes!). Remember, the earlier you start saving the more you will gain in interest as you let your savings grow.

A photo by Rosalind Chang.

30 – “Your wants”

Everyone’s favourite part! 30% of your monthly payment can be used for the things you want, but don’t need. Makeup, clothes, cocktails, coffee, eating out, Netflix etc etc.. There’s a lot that falls into this category which is why it accounts for a larger percentage than your savings.

You can spend as much as you want, as long as the first two steps have been covered. How much you earn will obviously determine how far this 30% will take you, but if you look after the first two amounts first it will be easier to see how much you have left over and help you be realistic and strict on what you spend.

food-salad-restaurant-personDo I stick to this rule religiously? Of course not! Every month is different and sometimes Zara has WAY too many nice things. But just keeping this budget system in mind can really help you not go too crazy. The longer you follow the rule the easier it gets, especially when you see that number in your savings account grow.

Did you find this post helpful? Let me know if you would like to see more blog posts for life tips like this one.