What is the 50/30/20 rule?
The rule divides your take-home pay into three buckets:
- 50% on needs — rent or mortgage, bills, groceries, transport, minimum debt repayments
- 30% on wants — eating out, subscriptions, holidays, clothes, entertainment
- 20% on savings and debt repayment — ISAs, pension top-ups, emergency fund, paying off credit cards faster
The beauty of it is simplicity — you don't need a spreadsheet with 40 categories.
The UK twist — use take-home pay, not gross
Always use your net take-home pay — the amount that hits your bank account after income tax, National Insurance, and any pension contributions. Using gross figures makes your budget look far more generous than it is.
What counts as a "need"?
Needs include: rent or mortgage, council tax and utilities, basic groceries, work transport, minimum credit card and loan repayments, and essential insurance.
Sky Sports, Netflix, your gym membership, and the £7 coffee subscription — those are wants, even if they feel essential.
What if 50% isn't enough for needs?
For many people in London, housing alone eats 40–50% of take-home pay. If needs genuinely exceed 50%, adjust the split — perhaps 60/20/20 — until your situation improves. The framework is a guide, not a law.
"You don't need a spreadsheet with 40 categories. Three buckets. That's it."
The 20% is the goal
The savings bucket is the part most people skip. Even starting with 10% and building up over time makes a compounding difference. The 20% isn't a punishment — it's paying your future self first.