You may want to note down various expenses in a spreadsheet or document so that you can categorise them into ‘needs’, ‘wants’ and savings. To explore the 50/30/20 method, you’ll need to look at what you usually spend and decide what’s essential and what’s non-essential. The increased cost of energy and groceries may also mean that essentials come to considerably more than 50% and that saving 20% simply isn’t possible. “Some people find that it’s not possible to get all essentials into the 50% bracket, especially if they’re living in a central city,” says Selina. Money for trips away or birthday presents for friends can come either from your ‘wants’ money or savings – it’s up to you. This would leave you with £450 to spend on what you want and £300 to pay down credit card debt, or set aside for an emergency fund, in case something expensive breaks and you urgently need to fix it. “There are clear and distinctive categories - 50% for needs, 30% for wants and 20% to put aside as savings.”įor example, if £1,500 comes into your account each month, £750 would go towards your ‘needs’ - rent, council tax, energy bill, food and transport to and from work.
“A 50/30/20 budget is a simple way of making a plan for your income and allocating your spend,” says financial coach Selina Flavius. Many will find that it’s not a realistic approach, given the cost of living squeeze, so we also look at some alternative budgeting methods.
Here, we talk to two financial experts about the ‘50/30/20’ budgeting rule. The cost of living crisis has highlighted the importance of budgeting and financial planning.
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