The 50/30/20 rule, adjusted for real life

The 50/30/20 rule is a starting point, not a law. It splits take-home pay into three buckets: 50% for needs, 30% for wants and 20% for saving and paying down debt. Its value is that every bit of income has a job before the month starts.

Where the rule bends

In a city with high rent, needs can reach 60% of pay. That is fine if the other buckets shrink on purpose rather than by accident. With irregular income, base the plan on your lowest typical month and treat anything above it as a bonus for savings.

A simple way to start

• Add up one month of essentials: housing, food, transport, utilities and minimum debt payments.
• Set the saving transfer to move on payday, before you can spend it.
• Review the three numbers once a quarter and move them five points at a time.

Most people overspend in two categories, not eight. Find yours first and the rest of the plan gets easier.