The 50/30/20 rule for splitting a household budget
✅ This is the simplest and best-known rule when planning a family budget — the 50/30/20 RULE.
According to this rule, the family income is divided into three parts:
🔹50% from the salary — for purchasing essential items and covering basic needs: groceries, housing, utilities, transport, clothing, footwear, communications.
🔹30% from salary — on purchasing desired things: travel, hobbies, restaurants, entertainment, fitness. These budget items are not essential, but they help you experience the joy of life.
🔹20% from family income to savings and investments: ETF, shares, real estate, savings for life after retirement pension, other major costly purchases and unforeseen adverse events.
Many banks offer a three-account option. Due to the «physical» separation of the money, there is no temptation to break the rule or unconsciously spend too much.
Thus, after receiving your salary, you should divide the money into three target accounts so that you are not tempted to spend more than planned or to save from what is left at the end of the month rather than from what was planned.
Certainly, this allocation can be adjusted based on the spending habits of each family, but the changes should not be substantial.
▪️For example, adjust the rule to 60/20/20 when a family needs more money to cover basic needs and less for pleasure.
With a significant income, the rule might look like 50/30/20
The rule is, indeed, simple, but, most importantly, try to use it in real life.
