The 50/30/20 Rule: A Guideline for Budgeting
Wishing there were an easier way to manage your money and budget wisely? Look no further than the 50/30/20 rule!
Think of your money going into three main buckets after you’ve paid your taxes.
50% for must-haves
This is for all the stuff you have to pay for and can’t skip. This might include:
- Your place: Rent or your share of the mortgage, and any house or flat bills
- Food: Your groceries and the basics you need in your kitchen
- Transport: Bus or train tickets, petrol for your car, or car payment
- Bills: Electricity, gas, water, and internet bills
- Minimum loan payments: The smallest amount you have to pay on any loans you have
- Work or study items: Anything you need specifically for your job or education
30% for fun stuff
This is the money you can use for things you enjoy and that make life a bit better, like activities and treats. Think of:
- Going out: Meals with friends, cinema tickets, gigs, and your hobbies
- Items: New clothes, technology and things that make you happy
- Looking good: Haircuts or beauty treatments that aren’t essential but you like
- Entertainment: Streaming services like Netflix or Spotify Premium
- Holidays: Saving up for that trip you’ve been dreaming of
20% for the future & getting rid of debt
This is super important for your future and getting rid of any money you owe. This should go towards:
- Savings: Putting money aside for emergencies, a deposit for a house, or just for peace of mind
- Retirement: Starting to save for when you’re older
- Paying off debt faster: Putting extra money towards loans or credit cards to save on interest and get them paid off quicker
How to manage the 50/30/20 rule
First, you have to know your take-home pay. Figure out how much money you get after taxes, and anything else, like your student loan, is taken out.
Multiply your take-home pay by 50%, 30%, and 20% to see how much should go into each bucket.
Keep track of what you’re spending your money on for a month or so. There are apps for this, or you can just use a notebook or a spreadsheet.
If your current spending doesn’t match the rule, don’t worry! Start making small changes to get closer to it. Maybe you can cut back a little on eating out to put more into savings.
Look at your budget every now and then to make sure it still works for you and your goals. Things change, so your budget might need to as well.
Next steps
The 50/30/20 rule is a really easy way to get a handle on your money without getting too stressed about it. It helps you make sure you’re covering your must-haves, having some fun, and also building a good financial future. Give it a go and see how it can help you feel more in control of your cash!
Sometimes, figuring out money stuff can feel a bit overwhelming. If you’re in Wales and aged under 25, remember there’s a free and confidential helpline called Meic. We can offer advice and support on all sorts of things, including money worries. You can contact us by phone, WhatsApp message, text, or online chat.
