Budgeting doesn't have to be complicated. You don't need spreadsheets with 47 categories and colour-coded charts. Sometimes the simple approach is the best approach.
The 50/30/20 rule is probably the easiest budgeting method out there. It's not perfect, but it's simple enough that you'll actually stick to it.
What's the 50/30/20 Rule?
It's dead simple. You split your after-tax income into three buckets:
- 50% for needs: The stuff you can't live without
- 30% for wants: The fun stuff that makes life worth living
- 20% for savings: Your future self will thank you
That's it. No complicated categories, no tracking every coffee purchase, no guilt about buying that thing you wanted.
The 50%: Needs (The Boring But Essential Stuff)
Your needs are the things you absolutely have to pay for. The stuff that would cause serious problems if you didn't pay it.
This includes:
- Rent or mortgage payments
- Council tax
- Utilities (gas, electricity, water)
- Food (groceries, not takeaways)
- Transport (to get to work)
- Phone bill
- Insurance (contents, car, etc.)
- Minimum debt payments
If you're spending more than 50% on needs, you've got two choices: earn more or need less. I know that sounds harsh, but it's the truth.
The 30%: Wants (The Fun Stuff)
This is where you get to enjoy your money. Wants are things that make life better but wouldn't cause disaster if you stopped paying for them.
Like:
- Eating out and takeaways
- Netflix, Spotify, and other subscriptions
- Gym membership
- Holidays
- Clothes (beyond basics)
- Hobbies
- Nights out
The key is being honest about what's a want vs a need. That daily Starbucks? Want. That gym membership you never use? Also a want.
The 20%: Savings (Your Future Self)
This is the most important bit. 20% of your income goes towards building your future financial security.
This includes:
- Emergency fund (3-6 months of expenses)
- ISA contributions
- Pension contributions (on top of employer matching)
- Paying off debt faster than the minimum
- Saving for specific goals (house deposit, car, etc.)
If you're not saving 20%, you're basically gambling that nothing will ever go wrong. And let's be honest, stuff always goes wrong.
A Real Example
Let's say you earn £30,000 per year. After tax and National Insurance, you take home about £2,000 per month.
Your 50/30/20 Budget:
- Needs (£1,000): Rent £600, council tax £100, utilities £100, food £150, transport £50
- Wants (£600): Eating out £200, subscriptions £50, clothes £100, entertainment £250
- Savings (£400): Emergency fund £200, ISA £200
See? Not too difficult.
When the 50/30/20 Rule Doesn't Work
Let's be real - this rule isn't perfect for everyone.
If You're on a Low Income
If you're struggling to cover your needs, you might be looking at 70/20/10 or even 80/20/0. That's fine. Do what you can and adjust as your income grows.
If You Live in London
Good luck keeping housing costs to 50% of your income. You might need to go 60/25/15 or find creative solutions like house shares.
If You're Debt-Heavy
If you've got loads of debt, you might want to flip it to 50/10/40 until you're debt-free. Getting rid of high-interest debt is usually better than saving.
How to Actually Do This
Theory is one thing. Here's how to make it work:
- Calculate your after-tax income: What actually hits your bank account each month
- Work out your percentages: 50% for needs, 30% for wants, 20% for savings
- List your needs: Be brutal about what's actually essential
- Set up automatic transfers: Move your savings percentage to a separate account immediately
- Spend the rest: Don't overthink it
The key is to pay yourself first. Move that 20% to savings as soon as you get paid, then live off the rest.
Common Mistakes
Confusing Wants and Needs
That £200 grocery bill isn't all "needs" if half of it is fancy cheese and wine. Be honest with yourself.
Not Adjusting for Your Situation
If you're 22 and living at home, you can probably save more than 20%. If you're 45 with three kids, you might need to adjust the percentages.
Trying to Be Perfect
Some months you'll overspend on wants. Some months you'll undersave. That's normal. The important thing is getting back on track.
Making It Stick
The best budget is the one you'll actually follow. Here's how to make the 50/30/20 rule stick:
- Use separate accounts: One for needs, one for wants, one for savings
- Automate everything: Set up direct debits and standing orders
- Review monthly: Check you're on track, but don't obsess
- Adjust as needed: Life changes, your budget should too
The Bottom Line
The 50/30/20 rule isn't magic. It's just a simple framework that helps you balance living for today with planning for tomorrow.
Will it make you rich overnight? No. Will it stop you from being completely skint when your boiler breaks? Probably.
And honestly, that's good enough for most people.
A budget is telling your money where to go instead of wondering where it went.