What Is The 50/30/20 Rule For Budgeting

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If you’ve ever looked into budgeting you may have come across rules scubas the 50/30/20 rule with all the different names it can often become confusing. The 50/30/20 rule is a budgeting technique where you split you’re take home pay so that 50% of your income goes towards your needs these are things like housing and food basically anything you need to pay for,30%of your take home pay goes towards wants this can be anything from days out to clothes and 20% goes towards saving and investing.

Why I like this

It gives people a frame work to work on it works whether your earning £20000 or £2000000 a year which means every time you get a pay rise its simple you know where all the money from the pay rise is going so lets say you’ve been given a £5000 after tax pay rise £2500 goes to your needs £1500 goes to wants and £1000 goes to savings and investing as you can see this is very simple to stick to.

How I personally improve on it

Just because this rule is 50/30/20 doesn’t mean you can’t use different percentages like 40/30/30 or 30/30/40 just choose what suits your goals and adjust accordingly I personally aim to invest and save 50% of take home pay so my split is more like 30/20/50 just choose what works for you and stick to it