What is the 50/30/20 budget rule?
Split after-tax income into 50% needs, 30% wants and 20% savings and debt repayment.
The 50/30/20 rule is a simple budgeting guide. It suggests using about 50% of your after-tax income on needs, 30% on wants and 20% on savings and extra debt payments.
It is a starting point, not a strict law.
The three parts
Needs are essentials such as housing, groceries, utilities, transport and minimum debt payments. Wants are non-essentials like eating out, subscriptions and entertainment. Savings and debt repayment cover emergency funds, investments and paying off debt faster.
Adjusting it
If your housing costs are high, you may need a different split, such as 60/20/20. Even saving 5% is a good start.
Use it as a check
Compare your actual spending with these percentages to see where to adjust.
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