The 50:30:20 Rule of Managing Payments and Savings

  • February 26, 2024
  • 03:35 Minutes


It’s often tricky to decide how much to spend on essential things, how much to use for fun, and how much to save. That’s where the 50:30:20 rule comes in – it’s like a simple guide that tells you how to split your money. This plan is to make sure you cover all your needs, have some fun, and still save for the future.

Let’s explore the 50:30:20 rule for more innovative and more stress-free budgeting.

What Is the 50:30:20 Rule?

The 50:30:20 rule is a budgeting guideline suggesting you allocate 50% of your income to needs, 30% to wants, and 20% to savings, providing a simple and effective money management strategy.

50% for Needs

The first pillar of the 50:30:20 rule allocates 50% of your income to cover your essential needs. This is the money you set aside for must-haves that keep your life running smoothly, including

  • Rent or mortgage payments
  • Electricity, water, heating, and other essential utilities
  • Groceries
  • Public transit, car expenses, or commuting costs

30% for Wants

In the second part of the 50:30:20 rule, you set aside 30% of your money for things you don’t need but want. This part recognises how crucial it is to have fun, pamper yourself a bit, and do things that make you happy. Here’s where you allocate funds for

  • Movies, concerts, streaming services, and other leisure activities
  • Restaurants and cafes
  • Funding for hobbies, personal interests, and other non-essential but enjoyable pursuits

20% for Savings

Now, for the last part of the 50:30:20 rule—it says, take 20% of your money and put it into savings and investments. This keeps your money safe and helps it grow for the future. Here’s where you direct funds to:

  • A financial safety net for unexpected expenses or emergencies
  • Retirement savings for a secure and comfortable future
  • Opportunities to grow your wealth through investments such as stocks, bonds, or other vehicles

Customizing the Rule to Fit Your Lifestyle

The 50:30:20 rule is a good plan, but we’re all different. You can change the rules to fit how you live, what you want to do with your money, and how much you make. Here are a few considerations:

  • If you live in a city with a higher cost of living, you might need to adjust the percentages to ensure your essential needs are met adequately.
  • For those with irregular or variable incomes, you might need a flexible approach to the rule. Prioritise covering essential needs and savings during prosperous periods.
  • If you have specific financial goals, such as saving for a down payment on a house or paying off debt, you may need to tweak the allocations temporarily.

5 Tips for Financial Discipline

Putting that 50:30:20 rule into action needs a bit of financial discipline. Here are some tips to make it smooth sailing and fit right into your lifestyle:

  • Consider using budgeting apps or good old spreadsheets to keep tabs on how much money is coming in and going out. It can help you stick to the budget percentages you’ve set.
  • Take a look at how you’re spending your money and what financial goals you have now and then. Life circumstances change, and your budget needs to be flexible enough to handle the changes.
  • Make sure you focus on saving up for your emergency fund first before you start splurging on non-essential stuff. You never know when a financial emergency might come your way, and having that safety net can give you some peace of mind.
  • To make life a bit easier, just set up automatic transfers to your savings account. This way, you’re consistently building up a financial safety cushion without even thinking about it.
  • Always keep learning about how to manage your money and where to put it. When you know your choices well, it helps you make really good decisions about your finances.


Dealing with money might seem hard, but the 50:30:20 rule can help as a guide to handling your cash. You just divide your money into three parts: half for things you need, 30% for things you want, and 20% for saving.

Have fun with your money while saving for the future. You can customize the rule to fit your lifestyle and dreams. It’s a simple plan for financial well-being and living life on your terms.

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