50 30 20 budgeting rule


This article revolves around the understanding of 50 30 20 Rule of Budgeting as well as its Problems and Solution to those problems.

Hello readers! It is a new day and we are back with a new topic of discussion exclusively for you. This article is related to your financial future. This article will be a turning point in your financial life, and I am sure about my saying. When you hear that ring in your Smartphone and see the notification “Your Salary has been credited in your account.” First, you filled with joy, a smile comes to your face.

This is proof of your hard work. You draw salaries each month for which you were eagerly waiting for.

But suddenly all the joy & happiness get vanished. Your mind gets filled with worries and thoughts about bills. You try to make your budget every month in hope. But due to a lack of proper knowledge of personal finance, sometimes you fail to manage your budget.

There are lots of articles available online which explain the budget rules. One of the most popular budget rules is 50 30 20 rule. Every single article available online is explaining the rule well but in this article, I will try to go further.

The 50 30 20 rule is a budgeting rule where you can review your spending and create your budget. This rule was popularized by Elizabeth Warren in her book, “All Your Worth: The ultimate lifetime Money plan.”

This rule explains what you should keep in mind while planning your budget. You should spend on your home, car, or another discretionary spending.

This rule divided into 3 categories in needs, wants, and savings. Here the 50 means 50% of your income shall go into your needs like groceries, housing, utilities, health insurance, car payment, etc.

The 30 means 30% of your income shall be reserved for your wants or self-infused essentials. Like shopping, a movie in the theatre, Gym, Netflix, Extra mobile bills, miscellaneous shopping.

Where the 20 means 20% of your income takes the responsibility of your secure future in the form of savings and investments.

50 30 20 budgeting rule


While following this rule in my life, I found a fundamental problem. We all hope for a bright and secure future and want new gadgets and other fascinating things in our life. We all have some goals, more precisely, short-term, medium-term & long-term goals that require planning today.

While following this rule, I found that this rule, though, fulfills my budget needs. Tells about how I should divide my income to fulfill my need, wants, and future demands.

We are the people who are doing a job and getting salaries every month. We plan our future by distributing our salaries into short, medium- and long-term vision.

But this rule doesn’t define or clarify a process to achieve my short term, mid-term & long term goals. This rule 50 30 20 lacks a clear vision to our short-medium- and long-term needs & desires.

The problems are:


By going further in search of the solution to these problems, I read a lot and talked with some of my closest friends.

One of my good friends and the author of Investment Teachings has presented me with the solution. He insisted I write this solution in my words and share it with you all folks.

He slightly changes the percentage while keeping in mind the need for a bright and secure future. He considered all the ups & down scenarios which could be possible in life while finalizing this rule.

According to him, we must follow the rule as below:

10-15-20-25-30 Budget Rule

This rule defines and clarifies the budgeting process in more depth and provides a better short, medium- and long-term vision.

This rule divided into 5 categories as below:

10% distributed as Savings (Short Term Financial Health)

15% distributed as Investments (Long Term Financial Health)

20% distributes as Security (Insurance / Security Against Unwanted Happenings)

25% distributes as Loan and Debt (Wants)

30% distributes into Spending (Needs)


According to this new budget rule, 10% shall be allocated to “Savings” to create your emergency fund.

In this busy life, we fall prey to a lie, our Job is “Secure”. But in this hard time of lockdown, as you all know, almost 70-80% either lost their secure jobs or are going to lose.

When life blossoms, we get busy and forget to think about such scenarios. But this will not happen again if you follow this new rule of budgeting.

Emergency fund always finds its place in short term vision. You never know when you need this emergency fund.

You must prepare your milestones in this process of making a guard keep safe in short term wobbling. Milestones keep you motivated and take you to your destination while keeping you relax. Here is an example of Milestones, you should start with small and gradually increase your pace –

1st Milestone: Must save money equals to your 3 months’ salary.

2nd Milestone: Must save money equals to your 6 months’ salary.

3rd Milestone: Must save money equals to your 1-year salary and so on…

These short-term visions can give you long-term relaxations and provide a safeguard.


This 15% shall be allocated to “Investments” to safe-guard your future. Investments shall be done with a long term vision say 15 years, 20 years and so on. You must allocate your investments in Real Estate/Gold/Stocks/SIP or mutual Funds.

To know more on investment topic, you would like to read my other articles: –


According to the new rule, 20% shall be allocated to “Insurance” to give yourself and your family a sense of relief. As you all know Insurance is a tool that comes very handy in case of any unwanted mishappenings. Insurance provides a sense of security to you and your family.

One should have Insurance in the following two forms:

  • Medical Security or Medical Insurance or Mediclaim’s: which provides a safeguard against unwanted illness which can wipe-out all life savings in a very short span of time.
  • Life insurance: Sometimes people underestimate “The All-Mighty God” and started thinking, nothing can happen to him. Sorry for my harsh words, but this is true. So an insurance policy picked with utmost caution can provide a guarantee of a secure future of your loved ones.

Here I clearly state that Term Plans should be chosen to provide a safeguard for your family. Endowment policy should not be picked.

We prefer term plans because of two reasons:

  • Premium is low
  • Sum assured is large in case of any mishappening

Endowment policy policies ensure a return of lump sum amount after a period, but the safeguard is not enough.


The 25% part of your salary shall be allocated to your wants. This can be bought either with a cash purchase or by debt on EMIs depending upon the price of your wish.

You can take the debt of any amount to complete your wants. As human nature, we all have desires to complete. So, to complete that desires, allocate 25% for that.

Please note that you have got only 25% of your salary for all your desires. When you take the debt of any amount the EMI of your debt must not exceed more than 25% of your income.

Let me explain you with an example.

Suppose you have ₹30K salary per month. The 25% part of this salary is ₹7500. So, your loan EMI not more than ₹7500 in that case.

It is always better if you avoid debt. If you do not take any debt, even in that case you also must allocate a 25% amount and save it. It is because when you need debt, this will be your down payment.


30% allocated to regular spending. This kept your day to day life running with ease. As you do not have worries for your future and any unwanted scenarios. In 50 30 20 rule, the regular spending belongs in 50% allocation. Here in the new rule, it cut down to 30% which is way more enough if you spend efficiently. Do not fall prey to those marketing tricks which drains your money out.  

It helps the high-income individuals to spend less.

In 30% you can include your groceries / Utilities / and other expenses.

This 30% also tells something about your income and spending habits. Now if you are unable to follow this new rule. Then either there is a problem with your income. You need a salary increment in that case.

If your regular needs unable to fulfill in 30% of your salary, then there are only two possible reasons:

  • You are working on a less salary. Ask your employer for an increment and change your current job, or
  • You have inefficiently spending habits.


In this article, we have come to know two ways of budgeting 50-30-20 and 10-15-20-25-30. Both rules are designed to keep your future bright and secure as well as let you enjoy your present.

Now prepare your own excel sheet or you can use the below Budget Calculators and start budgeting. And start tracking your expenses from today. Use this new rule 10-15-20-25-30 to make your budget more effectively.

This rule also clarifies whether we are saving & earning enough or not. Also, provide a road map for us to keep our financial life organized.

This is a must-have rule that must be at the back of our minds, always. This rule can give a clear view of short, medium- and long-term vision in your mind and can provide prosperity.

Let us know in the comment box below which method you do like the most.



  1. Nice explanation.
    I am very happy to see the budget calculator with old and new ratios.
    Hope we will get lot of information to invest in shares.

  2. Very Good Article.. Both categories works depending on particular income and expenses.
    Thank you for sharing!!

    1. Thank you. Yea both categories are good.
      Wherever the person is comfortable he/she should make their budget. to optimize unnecessary expenses.

  3. Sarthak Sharma

    Very helpful article and the calculator makes it even more simple.
    Thanks for the hardwork you’re doing.

    1. Thanks, Sarthak.
      Your appreciation always gives me energy and motivation to work harder and do more

  4. Truely a master piece …with a very nice way of explaining things..I like the article and also like the intention of yours for us. Thanks…

    1. Thank you for your appreciation, Deepak.
      Without your thoughts or explaining the new rule, this article will never be completed.
      You give me authority to write this article in my words. You are a real gem.

  5. Awesome…. Though most of the people aged up reading financial working model must be aware of it, but the way you have used us commendable for any newbie.
    Keep up the good work

    1. Thanks for your appreciation..
      Your appreciations always motivate me to provide more and more valuable informations to my readers..

    1. Hi Ashish,
      Your rent should come under 30% allocation. If you are not able to manage in 30% it’s an indication that you need to increase your income.

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  7. A good and simple illusion of how to manage money.
    Most of the people nowadays only follow “how to earn”
    No one is thinking how to manage and most of the time we saw people had continuously faced the same problem during the pan life of working.
    Struggling for credit, payments of child fees, house rent or house EMI, etc some basic

    So it’s fine to easily understand finance in a batter way.
    Thanks, Jaspreet Sir for this valuable article 👍👍👍

    1. Thank you Yogesh, for your valuable comment.
      I hope you will manage your money and advise other peoples to manage their funds for the future.

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