50 30 20 Rule – The Simple Way to Save More

Tuesday, February 9, 2021

Budgeting that isn’t so bothersome.

Saving money and budgeting are like two peas in a pod. But budgeting doesn’t have to be time-consuming or complicated. In fact, the now famous “50 30 20” rule to budgeting is perhaps the simplest way to save.


The 50 30 20 rule was coined by ElizabethWarren – U.S. Senator and Harvard bankruptcy expert – and her daughter Amelia Warren Tyagi in their 2005 book  “AllYour Worth: The Ultimate Lifetime Money Plan” .

Referencing over 2 decades of research, the conclusion was simple: you don’t need a complicated budget to get a handle on your finances, you just need to balance your money across your needs, wants, and savings goals.

The 50 30 20 Method

At its core, the rule is simple: divide your monthly post-tax income into spending three categories: 50%for needs, 30% for wants, and 20% for savings, or paying off debts.

Dividing spending into just three categories saves you time and effort sorting through every little expense.

50% on Needs

Needs – that make up 50% of the 50 30 20 rule – are simply expenses that you can’t avoid, or those that would be very difficult to live without.

Needs Include:

·      Rent or Mortgage Payments

·      Electricity & Gas Bills

·      Insurance (car, pets, home)

·      Transport Costs

·      Minimum loan repayments

·      Basic Groceries

If your total needs expenses exceed 50%, Warren suggests changing your circumstances to shift this down to50%, such as moving to a cheaper apartment or switching energy providers.

Nevertheless, if decreasing your needs costs is not possible, you can dip into your ‘wants’ column to maintain a healthy financial balance.

30% on Wants

Wants take up 30% of your after-tax income, and are defined as expenses that are non-essential. These are things that you choose to spend on but could survive without if you needed to.

Wants Include:

·      Eating Out

·      Clothes Shopping

·      Holidays

·      Tech Gadgets

·      Gym Membership

·      Non-essential Groceries

·      Entertainment Subscriptions (Netflix, Amazon Prime)

·      Unlimited Calls/Texts/Data Plans

This is probably the easiest and most effective category of the 50 30 20 rule to cut down on when you are trying to save more money.


The final 20% is categorised as money towards your savings, or to pay off outstanding debts. Minimum loan/debt repayments are under the label of ‘needs’, however if you decide to administer any extra repayments to pay them off faster, these count as savings.

If you don’t have any debts, you can simply automate 20% of your pay-check into your savings accounts using personal finance apps like Wagebox. This is an effective way of saving up for a down-payment on a house or an emergency fund for difficult times.

How to Implement the 50 30 20 Rule

1. Calculate Your Post-Tax Income

If you are an employee with a steady pay-check this should be pretty simple. In fact, your post tax-income will be written on your payslip. However, if your pay-check deducts pension or health insurance funds, you should add them back in.

If you are a freelancer or self-employed you should calculate your average income and deduct the amount you set aside for taxes and your business expenses.

2. Categorise YourSpending into the Three Groups

Review your bank statement for the previous month, and manually designate each payment into one of the three categories. Alternatively, a quicker way is to use the Wagebox app, where your spending is categorised for you.

3. Adjust Your Budget to Match the 50 30 20 Rule

If you are drastically off the 50% mark for needs, you may want to re-evaluate your living situation. We realise those – this is often not so simple. So, the easiest way to balance your budget is by seriously evaluating your ‘wants’.

That doesn’t mean seeping all the joy out of your spending. It just means being more deliberate about which ‘wants’ make you the most happy or stress-free.

The more concise you can be on your wants, the easier it will be to hit your savings target.

To do this you can make a 5030 20 rule spreadsheet using various software, such as Microsoft Excel, Apple Numbers and Google Sheets.

Or simply use a financial app like Wagebox to make your new way of budgeting a walk in the park.