Better budgeting with the 50/20/30 rule

The 50/20/30 rule helps you budget better by splitting your spending into three categories: living expenses and essentials, financial goals, and lifestyle. Here's the idea…

50% of your income should go on living expenses and essentials

Your rent or mortgage, food, bills, work travel and so on

20% should go towards your financial goals

Saving or paying off debts.

30% should go towards your lifestyle

Non-essential, nice-to-have things like eating out, cinema trips or live sports.


So if you take home £2,000 per month, using this rule, £1,000 would go towards living expenses and essentials, £400 should go towards financial goals, and £600 should go towards lifestyle things you enjoy.

If the ratios of how you’re spending on these areas is wildly different to this, then it may be time to consider whether you want to reallocate some of your lifestyle spending towards your savings (or vice versa) — or look to cut down on household bills. Try calculating your 50/20/30 budget now to get a better view on how you spend your money.

Remember, this isn’t about perfection, it’s about progress. Don't worry if your spending doesn’t reflect the 50/20/30 rule today, you don’t need to get it bang on first time. And you may find that this rule isn’t right for you, after all, money management is not one size fits all. This 'rule' is really more of a guide to see where you might be overspending and to give you a new way to view your spending.

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