Struggling to figure out where your money goes every month? The 50-30-20 rule offers a simple and effective way to manage your finances—giving you clarity, control, and confidence.
What Is the 50-30-20 Rule?
It divides your after-tax income into three categories:
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50% for Needs
Essentials like rent, groceries, utilities, insurance, and loan EMIs. If it’s a must-have, it goes here. -
30% for Wants
Lifestyle expenses like dining out, streaming subscriptions, hobbies, travel, and shopping. -
20% for Savings
For your future—emergency fund, investments, retirement, or extra debt repayments.
Why Does This Rule Work?
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Simplicity – Fewer categories mean easier tracking.
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Balance – Covers today’s needs, enjoyment, and tomorrow’s security.
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Flexibility – You can adjust percentages as your life changes—just stay mindful of the balance.
How to Use the 50-30-20 Rule
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Calculate your monthly income after tax.
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List your monthly expenses and categorize them as needs, wants, or savings.
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Allocate your income:
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50% → Needs
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30% → Wants
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20% → Savings
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Automate your savings and debt repayments.
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Review regularly and tweak as your income or priorities evolve.
Example: Income ₹60,000/month
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Needs (50%): ₹30,000 – Rent, groceries, bills
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Wants (30%): ₹18,000 – Dining out, entertainment
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Savings (20%): ₹12,000 – Emergency fund, SIPs, debt repayments
Pro Tips
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If your needs go over 50%, look for ways to cut fixed costs or grow your income.
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If you have debt, prioritize repayments within the 20% savings portion.
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Use budgeting apps to track spending and stay consistent.
Final Thoughts
The 50-30-20 rule isn’t just about numbers—it’s about building healthy money habits. It’s a guilt-free, flexible way to enjoy life today while securing your future. Whether you’re just starting your financial journey or realigning your goals, this rule can be your go-to budgeting blueprint.