How to manage your salary easily (The 50/30/20 rule)

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1 year ago

The first rule to having a happy life is to have a nice wallet

Many people find themselves suffering from pay check to pay check. As they go on buying sprees constantly without properly tracking what's their current balance and what they spend their money on, they usually end up with a bunch of unnecesary items in their home and a lot of necessary expenditures not being covered by the end of the month. Before jumping to the conclussion that you're not earning enough income, you might just give a little check to your finances and determine what you can and can't live without, so you can keep a better ordered register of your monthly budget. One neat strategy for this is to apply the 50/30/20 rule, a common principle used for dividing your income so you can cover all your expenses having a responsible account of what your limits are, so you can both save and equally enjoy the money earned. Let's begin by explaining what this rule is:

What the 50/30/20 rule is

The 50/30/20 is a budgetting method for personal finances, that owes Its popularity due to Its simplicity and Its general approach to one's earnings. It consists into separating your monthly income (In this case your net income or money after taxes) in three separate categories, each one with a different percentage of your total earnings. The first one corresponds to your needs, the second to your wants and the third to your savings/debts/investments. Now let's explain every percentage in detail.

Needs (50%)

When we mean needs, we're talking about all those things we can't live without, otherwise making our lives extremely difficult, not covering our needs and putting us even in risk of death. Examples of this are groceries, utilities such as water and electricity, gas (If you have a car), medicine and healthcare. So better ask yourself If you really can or can't live without something in a literal way before determining If It is a need or It belongs to the next category.

Wants (30%)

Dedicated to those things that we can live without, though they affect our life quality slightly. Things such as having meals outside, clothes, electronic devices for leisure, memberships in streaming platforms and many other things that are expendable though enjoyable for you can be included in this slot.

Savings/Debts/Investments (20%)

This is the part dedicated to having a sound financial couch in which to fall, either in case of debts that you have to pay, emergency funds for unemployment or just money dedicated to future investments and ongoing ones. Common funds to find here are emergency funds, where you save 6 to 12 months of expenditures to maintain your lifestyle without It being compromised in case you find yourself without a job. Also, college funds, credit card payments and sums for trading/businesses or property buying are found here.

Now that we know how to apply the 50/30/20 rule to our lives, we might ask ourselves why It is so popular. To demonstrate the reason why, I will talk about the benefits that can provide to the ones applying It:

Ideal for people with little time in the day:

Many people with a job consume most of the hours of their day working, and by the time they come home they surely are tired and want to rest, making this method perfect for these types of routines. By not taking too much time to formulate and separate our expenses in a super detailed and complicated way, It provides us with a solid foundation in which to analyze our expenditures and control them, by just putting each thing we spend our money on in a different column and letting us know when to calm down with our wants and pay more attention to the other two sections.

Easy to apply:

It just has three items to take into account with different percentages of our money to dedicate to, so It makes up, in opposition to many other finance managing methods, for a pretty simple way in which to be more responsible about our budget and to take matters into account.


I hope that with the information provided in the article you can get to know a little better about the 50/30/20 rule, one that you might even be using before reading about It, and If you don't, It can convince you to give It a try. As people have different incomes and our needs might be bigger than 50% of our income can afford us to, I recommend you to give a check to all your needs and see If they really are that by asking If they are absolutely essential to your existence, and even considering If downgrading a little on some of them can be detrimental to you. If nothing can be done about that, you can be more flexible with the percentages and adjusting them to your particular needs. As always, I wish you the best and good luck!

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