Income Budget Management – The 50 30 20 Rule

This article explains how income budget management and the 50 30 20 rule can help you to budget your income.


Have you even heard of the 50/30/20 rule? 

Then read on!

We all know we should budget manage our income, but when payday rolls around how many of us can actually say that we properly plan how we’re going to spend that money? 

Sure, we know we have to pay our rent or mortgage…but that water bill could wait until next month couldn’t it? 

After all, you’ve wanted those shoes for ages and you deserve a treat….and it’s not the end of the world if you don’t save anything this month…

Plus, it’s been so long since you’ve ordered a great big pizza and had a few beers.

Budget Management, More than Money
Income Budget Management – The 50 30 20 Rule

Let’s face it, this isn’t an uncommon thought process – particularly if you don’t have the responsibility of a mortgage or children. 

However, it’s all too easy to end up on a slippery slope of excessive spending and then be constantly playing catch-up to cover essential expenses because you haven’t budgeted properly. 

This in turn makes it impossible to save anything for a rainy day, and before you know it you’re living paycheck to paycheck and your stress levels are mounting as high as the bills.

But there is another way – the 50 30 20 rule. 

My article explains the rule and details how you can incorporate it into your life’s current budget management – I’ve even included a link to my FREE Excel spreadsheet that will help you use the rule to manage your budget!

(Don’t say I never give you anything).

What Is The 50 30 20 Rule?

The 50 30 20 rule is a budgeting management system that was first coined by American senator and bankruptcy expert, Elizabeth Warren.

The basic idea of budget management is this:

You spend 50% of your budget on the things you need.

30% on the things you want.

And then put 20% into savings for the future, or towards paying off debts.

Sounds fairly simple doesn’t it? 

It’s ideal if you want to get a handle on your debts, start saving steadily, and avoid having to make a very detailed budget that will end up being too confusing to follow.

How Do I Create A 50 30 20 Budget?

The simplest way to create your own 50 30 20 rule for managing budgets is to break it down into steps.


1. Work Out Your Monthly Income After Tax

If you’re employed you can find this out very easily – it will be the net pay figure on your payslip.

If you’re self-employed then your after-tax income will be your gross income minus your business expenses.

If your income is quite irregular, work out your lowest or average income and take your budget management from there.

2. What Do You Need?

Identifying expenses that you absolutely need to cover sounds simple – rent or mortgage and food, right?

Well, yes, but a ‘needed’ expense is something that you have to cover in order to have an acceptable quality of life.

(No, an XBox and golf club membership don’t count).

Things that do count include:

Utility bills

Council tax

Anything that involves you getting to work – petrol/tax/mot/car maintenance costs, bus pass, train tickets etc

Internet and mobile phone payments (even more so if you use them for work rather than just for playing Candy Crush and adding to your questionable browser history)

Food, clothing, personal care (toothpaste, soap etc)

It’s always best to start with your most basic needs and then go from there – everyone’s idea of what constitutes an acceptable quality of life is different. 

Also, it could be that some expenses cover both ‘need’ and ‘want’.

Let’s say for example that you drive a very expensive car. 

You do need  it to get to work, but you could get one that is cheaper to maintain and run. 

In that case you could share the cost between the ‘need’ and ‘want’ categories.

Ok, so you’ve identified what your needs are. 

Now the science bit: don’t spend more than 50% of your monthly income on them.

If you think that you will, think of ways to reduce their cost – for example getting that cheaper car or walking to work, buying less treats with the grocery shopping, or finding ways to reduce your energy bills.

3. What Do You Want?

Now the good bit; tell me what you want, what you really, really want. 

Spending 30% of your earnings on whatever you want sounds like a sweet deal – but easy, tiger, that’s not good budget management! 

This category isn’t designed just to cover season tickets, designer handbags, and that lifesize cardboard cutout of Jennifer Lopez – it has to cover everything that isn’t deemed essential, and there’s a lot more that isn’t essential than you think…

…and you’ll find it soon adds up…

For example….

Tv subscriptions/streaming services for music, films and games

Mobile phone or laptop upgrades

Make up, perfumes, after shave

Trips to the barber or hairdresser – or in fact any type of personal grooming (are you someone who goes for regular manicures/pedicures/waxes/eyebrow tints/fillers etc? If so, you’ll have to budget it in with your 30% or else ugly-it-up like the rest of us)

Holidays and trips

Takeaways and meals out

All of this (and I’m sure there’s a lot more that you want), should take up no more than 30% of your income. 

It’s a good idea to estimate roughly how much you spend each month on things you ‘want’, and work out ways to reduce your outgoings if you can; maybe join a cheaper gym, eat out less, cancel all but one of your streaming services.

5. Repaying Debts

This last category really is adulting at its very finest – I’m talking about saving for the future and paying off any debts.

Research shows us that 15% of people over the age of 18 in the UK have NO savings at all; while 1 in 3 has savings of less that £1,500.

Living each day ‘as if it were your last’ is a fine sentiment until you wake up the next day and realise it wasn’t your last, the washing machine flooded the flat, and you and your housemates have a grand total of £4.75 between you.

With the last 20% of your wages you should start building a rainy-day fund for such emergencies. 

You can also save towards a house deposit or put towards a pension. 

I know these don’t sound like very sexy things to do with your money – but I promise you, you will be glad in the future that you did.

Another, even less exciting thing to do with the last of your hard-earned cash, is use it to pay off any debts such as credit cards and loans. 

It’s always a good idea to get these sorts of debts paid off as soon as possible so that your credit score doesn’t suffer too much. 

This will be especially important to you in the future if you want to get a mortgage or any other type of credit.

Click here to access my spreadsheet that will help you implement the 50 30 20 rule! 

How does it work? 

Simply enter your outgoings for each category in the ]left hand column, and how much each outgoing costs in the middle one. 

Column C is where you enter your income (after tax), and If you want to be even more organised, you can use the last two columns to enter the dates your direct debits go out, and from which account.

Then all you have to do is sit back and let the spreadsheet do it’s thing!

Good luck on your money-saving journey!

If you want to find out more about the 50 30 20 rule, or about income budget management in general, please give us a call.


I’m the Life & Critical Insurance guy! Having worked throughout London and the South East for years in this industry, seeing many bad habits, I wanted to create a company that put the man on the street first! I wanted to share all my knowledge in a way that was easy, simple and fun to read and I wanted to make sure whenever I or a member of my team speak to a customer, we cut out the ‘industry jargon’ and never pressure or push anyone to take out a policy they don’t want or understand, thus More Than Money was born!

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