How to budget and save money with the 50:30:20 rule

It’s January, the worst month of the year for your bank balance.

And, you’re anything like me, you blew all of your money in December on Christmas gifts for others, Christmas treats for yourself, going out to festive parties and even going on one final winter break.

Now you’re broke, living off baked beans for the inevitable future, refusing to put the central heating on and are looking for a way out of the black.


Look no further…

I’ve recently found a method of saving money and living within your means, pioneered by Harvard bankruptcy expert Elizabeth Warren. It’s called the 50:30:20 rule.

The aim is to keep spending within your earnings, keeping some money for fun, while still saving for the future. Using this method last year, I managed to save up thousands, while still living comfortably, but not extravagantly.


Here’s how you break it down. I’m going to use the UK average wage (according to the ASHE) as an example: £27,600 per annum.


This varies depending on your salary and tax, as well as pension contributions, the amount you pay into your pension. The current minimum pension payment is 1%, so let’s go with that.

£27,600 – £276 (pension) = £27, 234

Next minus tax and national insurance.

£27,324 – £3,218 (tax) –  £2,332 (National Insurance) = £21,774


So you’ll take home £21,774 per year, that means around £1,814 in your pocket each month.

NOTE: If all the numbers are a little confusing, this handy calculator takes off all your taxes and contributions for you, and works out your monthly allowance.


Use 50% for your needs, that’s £907 per month.


It’s up to you what defines needs. I consider it to mean (basic) food, rent, bills, necessary travel (not holidays!) and any insurance. It’s also good to include gym memberships and other subscriptions like Netflix or Spotify in this as you’re committed to paying for them monthly.


Take 30% for your wants, that’s £544.20 each month for the stuff you don’t need! Seems like a lot, right?

I use this for meals out, mini-breaks, evenings at the cinema or the bar. It also includes any new clothes that aren’t essential (ask yourself, do you really need that top?), takeaways and hobbies.


Keep the remaining 20% on lockdown. That’s all of £362.80 to go towards paying off debt and then saving.


I’d recommend getting out of the red before saving towards anything else. Once you’re clear of your overdraft, money you owe to friends and family and any other debts, you can start a savings pot. Until then, you face losing a lot of money through charges.

I put this amount of money into a savings account as soon as I’m paid, to avoid any over-spending!


Depending on your salary and your lifestyle, you might find 30% is too much for fun spends. If you’re feeling thrifty, I would switch the 30% to savings and spend the 20% on treats – £500 is a lot to spend each month on things you don’t even need.

You’ll have to make allowances and be strict with this method. Sometimes one of your “needs” can be classified as a “want.” For example, food is a need, but that Ben & Jerry’s ice cream is definitely a want. Be clear to yourself.

The great thing about this method, is you realise you may spend more on “wants” than you think. A very small rotation of clothing is a need, most wardrobes don’t need refreshing each month. Those new shiny boots? They’re a want.

Finally, the 50:20:30 rule is a great model to start thinking about your budget but it isn’t perfect. Sometimes, you’ll have unexpected additional costs, such as a broken phone or a leaky shower.


And, when you’re booking a holiday, you’ll need to factor that in too, so don’t feel guilty if you can’t save as much each month.

For me, it’s been a great place to start saving. I hope you find it useful too.

Cristina x

83 thoughts on “How to budget and save money with the 50:30:20 rule

  1. If only I was earning something as amazing as 1,800 that would be an amazing wage to live on but that being said I do like the sound of the 50:20:30 rule, as it might help me save more money. Its not a concept I had thought of yet but I am definitely open to trying it out!

    Liked by 1 person

  2. I haven’t seen this rule before, but I think it’s a good idea. Last year I started setting myself a budget for wants, and I think it does us good to see it written down somewhere – otherwise you don’t keep track of that night out or that make-up or that new dress – and how they all add up!

    Liked by 1 person

  3. This is such a great post. As a student i spend all my allowance even before i get it, I would mentally calculated how each penny would be spent but with this I guess I could start saving…. Thanks for sharing

    Liked by 1 person

  4. Great guidelines for anyone’s budget. I’m also happy for the reminder about needs versus wants. I’m awful about convincing myself something is a need when, in reality, it’s just a want. x

    Liked by 1 person

  5. Wow I’d never heard of the 50 30 20 plan before but sounds genious. I love that it covers the necessities but still allows you to treat yourself ever so often while making sure you’re keeping savings for the future on hand.

    Liked by 1 person

  6. I am all about the budgeting!!!!

    Some top tips in there, I’m sure they’ll help a lot of people.

    Thanks for sharing!

    PS I’m saving for a wedding at the moment and I feel like it’s 90:10 😱😱😱

    90 = pure savings

    Liked by 1 person

  7. 50.30.20 is a great rule. I will try to follow the same and hopefully end up saving sufficient amount of money for the future. I liked the 30% rule where you need to spend 30% of money for extra activities. Thus you can have good work / enjoyment balance in lifel

    Liked by 1 person

  8. I totally agree with these great ideas, this is really true. When it comes to savings I’m always on it and also for emergencies. Thanks for sharing these great tips!

    Liked by 1 person

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