Could the “50/20/30 Rule” save you money?

 If you do much reading around personal finance, you may feel like there are even more budget plans than diet plans out there these days. Forget the 5:2 diet and ketogenic diets, this is the world of envelope method and the goals-driven method.

At first glance all of these different strategies for saving money can seem more than a little overwhelming. How do they work? Are they suitable for you? Can you wrap your brain around each one? Most importantly: can you stick to it?

There's no "best budget" plan out there. Instead each of these options provides a structured way for us to think about our finances. The more organised and aware we are regarding our money, the better we're likely to be at sorting and saving it.

What's the 50/20/30 rule?

The 50/20/30 rule is an increasingly popular tool many people use to work out what they're doing with their money. In basic terms, this approach does what it says on the tin:

• 50% of your income should go on essential living expenses (rent, food, petrol etc.)
• 20% of your income should be spent on "wants" (social occassions, new shoes, good books etc.)
• 30% of your income should go towards your financial goals, whether that's building your savings, reducing debts or investing.
  
  

Why try it?

This form of budgeting isn't the best option for those with unsteady incomes. However, if you have a regular, predictable pay cheque, the 50/20/30 approach can work very well.

Unlike many budgeting systems, it doesn't overcomplicate things (complex budgets can feel demotivating if you slip up in one area, but this broad approach gives you room in each are to "rebalance"). This budgeting approach is also pleasingly simple, requiring only basic calculator skills to manage.

For more advice about personal finance, especially regarding personal loans, contact our experienced team today.