Spend, splurge and save with the 50/30/20 budget rule

If you’ve ever wondered how to juggle everyday expenses while still building up your savings, the 50/30/20 budget rule could be the simple yet effective answer you’re looking for. It’s not about spreadsheets and number-crunching, it’s all about balance. 

This rule splits your income into three easy-to-manage categories: 50% for spending on needs, 30% for splurging on wants, and 20% for saving. Let’s break it down.

What is the 50/30/20 rule?

First popularised by U.S. Senator Elizabeth Warren, the 50/30/20 rule is a practical guide for everyday budgeting. It’s designed to make financial management easier while still leaving room for a bit of indulgence. The idea is to allocate:

• 50% to SPEND on needs:
  This category is for your non-negotiables. Housing, utilities, food – these are the core expenses that keep your life running smoothly. While 50% might seem like a big chunk, if your needs are eating up more than half of your income, it might be worth revisiting where you can trim costs. 
  
  Could you save on your energy bill? What about finding a cheaper supermarket? Being strategic here gives you more room to play in the other categories.
  
• 30% to SPLURGE on wants:
  Here’s where the 50/30/20 rule really stands out, it gives you permission to enjoy your money! Splurging on a little luxury here and there isn’t just okay, it’s part of a healthy budget. 
  
  By setting aside 30% of your income for things you want (but don’t necessarily need), you can enjoy guilt-free spending. Whether that’s upgrading your wardrobe, going out for brunch, or splurging on a concert, this category is designed for fun without derailing your finances.
  
• 20% to SAVE or invest:
  The final 20% goes toward saving or reducing debt. This isn’t just for building an emergency fund, but also for setting yourself up for future financial stability. 
  
  Whether it’s growing your savings, investing, or paying down debt faster, this portion is all about moving forward. Even if 20% feels like a stretch right now, start small and build up. Consistency is key.

Why the 50/30/20 rule works

The beauty of this rule is its simplicity. Instead of tracking every dollar, you focus on balancing your spending across just three categories. It also keeps your budget flexible, letting you enjoy life’s pleasures while staying financially responsible. Plus, with “spend, splurge, and save” as your new mantra, it’s easy to remember and stick to.