How To Manage Your Money With The 50-20-30 Rule

Photo via A Portable Package

February is starting which means your trial month of 2016 is officially over. So it’s time to get serious about your new years resolutions. Your Christmas money is probably all spent and you’ve started your year the same way you always do, living from paycheck to paycheck, counting down the last days of the month. With the 50/20/30 method you will be able to budget your money. Whether you’re in college, have a full time job or have just started to earn money: the great thing about this rule is that it applies to every budget and helps you gain control of your money.

50 – “Your needs”

First and foremost about 50% of your paycheck goes to the essential things you need in your life. Your “needs” are things like your rent, your car, your public transport card, utilities and groceries. These are payments that don’t vary much and things you know you have to pay every single month, whether you want to or not.

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20 – “Your savings”

This one sounds hard but 20% of your income each month should go directly into savings. The money you save will be beneficial for your retirement contributions or to pay off debts you might have like college or car loans. Put the money in a different bank account, so you don’t even think about spending it on anything else.

30 – “Your wants”

Now for the fun part! 30% of your monthly payment can be used for the things you love to do and the things you “want” in your life. As long as you’ve taken care of the first two steps, this one is completely up to you. You can spend it on your hobbies, eating out, shopping or your monthly Netflix subscription. It can be tempting to spend more than 30% on your “wants” but try to honest and strict with yourself and don’t even start to cheat.

By Hannah Lutterbach


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  • Sandra Lewis

    Excellent advice , always pay yourself first, cover your essentials.

  • This is brilliant advice, I’ve never actually heard it before. It’s definitely going to stick with me for a while now. Thanks CGD!

  • I totally needed this post, making lifestyle changes aren’t easy but having some sort of guide helps, the percentages you used can’t work for everyone but the idea is great!
    Modavracha | Fashion and Lifestyle Blog

  • Noise in Wonderland

    A nice, simple way to budget. Love this.


  • Tamsyn Whelan

    In theory this should work, but unfortunately when you are a fashion designer living in London, your ‘needs’ definitely equate to more than 50% off your salary! Great idea for the future though! (Hopefully!!)

    • You are so right. Living in some big cities and suburban areas needs are definitely above

  • I love this post! Thank you so much for this advice. I have been really careful with the money I’m earning and I think this rule would be excellent for me! Thanks again!

  • Noni Kane

    Amazing advice!

  • Love this post! I need help sometimes understanding just how much I should save, and this article answered just that. Great article!

    Check out my latest article l xoxo Redhura

  • I never thought about dividing my money this way. It seems pretty simple and straightforward. Thanks so much for sharing!

    Fariha |

  • Great advice! :D I would agree! But would probably take some of my wants and put it in my savings

  • Anonymous

    This was stolen from the MintLifeBlog

    If you are to swipe ideas wholesale, be sure to credit them.

  • And “wants” can get dicey. My first apartment on my own I was terrified of running out of money. I’d just moved from a midsized city to the thick of Chicago, by myself. I did not have cable, but I did have Internet. I had a very cheap cell phone plan. I had cheaper car insurance b/c I mostly used public transit and only used my car on weekends. I did not spend hundreds on my hair, nails, or whatever. There are lots of “needs” that are actually “wants.”

  • Tomas Thrainsson

    Bullshit advice for some countries. I’d have never moved out of Iceland if I’d tried this, because my paycheck didn’t cover my rent and my wife’s income would cover what was missing and then ghe rest of the bills. At thd end of thr month we had nothing leftover

  • Estrella

    Great article. Hard to put this into effect when unemployed but sounds about right.

  • Vinincia Strachan

    This information will only work for those who try it. It works for me. Thanks Hannah!