If you’re struggling to save money the ’50/30/20′ rule could help you budget

Ella Glover

Published October 13, 2024 4:36pm Updated October 13, 2024 4:36pm

Close up of United Kingdom Pound Sterling bank notes. — This trick will help you budget your money each month (Picture: Getty Images)

Times are tough, (especially with the recent energy price cap increase), and as such many of us would like to be putting a little more away each month.

Everyone’s financial situation is different, and while some might be stretched to their limit, others could be blowing money on things they might not really need.

If saving a little bit more of your paycheck is your goal, but you don’t really know what the best way to start budgeting is, then the 50/30/20 rule could be a good starting place for you.

This tip will allow you to start regularly saving part of your income each month, which will be especially handy in the run up to Christmas.

Here’s a closer look at how it works…

Monthly 50-30-20 Budget rule of guideline for saving and spending the expense you need and want — How to use the 50/30/20 method (Picture: Getty Images)

What is the 50/30/20 rule?

Money-saving experts at Savoo, a voucher code provider that donates to charity with every voucher used, recommended the 50/30/20 rule to help keep spending on non-essentials within an allocated budget and promote saving.

Essentially, the rule involves dividing your spending into three categories: needs, wants and savings.

Then, each month, allocate 50% of your salary to needs, 30% for wants and 20% for savings or debt repayments.

The 50/30/20 Rule explained:

Needs – 50% of total salary

Needs include essential living costs such as rent, bills, food and transport to and from work or the school run.

Wants – 30% of total salary

Wants are non-essential costs, such as shopping, eating out, gym memberships, subscriptions, trips away and nights out.

Savings or debt repayments – 20% of total salary

The final 20% of your savings should then go towards paying off debt beyond minimum payments or putting money into a savings account, investment, or pension fund.

Source: HSBC

Separating your money into pots like this is a failsafe budgeting technique.

As Ed Fleming, Savoo’s managing director, says: ‘When a lump sum comes into your account it is easy to get carried away.

‘Putting it straight into different money pots or waiting until the month’s rent and bills have been subtracted makes it much easier to see exactly how much you have to play with.

‘Then, around halfway into the month, it’s easier to see how much you have for the remaining weeks to enjoy things like meals out, trips and hobbies.

‘You can then use tools like discount code sites, comparison sites, and clearance offers to reduce and help your money go much further.’

Have you tried the ’50/30/20′ rule for budgeting? Share your experience in the comments!Comment Now

Obviously, finances are very personal, so budgeting rules will never be a one-size-fits-all method.

For some, 50% of their paycheck may not be enough to cover all essential costs, while 30% may be more than they tend to spend on unessential things like gyms and subscriptions.

If this is the case, try splitting your money in a way that suits your specific costs. Maybe that’s more like 60/20/20 or 70/20/10.