{"id":67008,"date":"2025-09-16T06:11:09","date_gmt":"2025-09-16T06:11:09","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/67008\/"},"modified":"2025-09-16T06:11:09","modified_gmt":"2025-09-16T06:11:09","slug":"what-is-the-50-30-20-budget-rule-and-can-it-help-you-achieve-your-savings-goals","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/67008\/","title":{"rendered":"What is the 50\/30\/20 budget rule and can it help you achieve your savings goals?"},"content":{"rendered":"

But what most people probably don\u2019t know is that the 50\/30\/20 rule is not only embedded in good economic principles, but the creator of it was none other than US senator Elizabeth Warren.<\/p>\n

The former Harvard lawyer, bankruptcy expert and current Trump-botherer devised the nifty notion of spending 50pc of your net monthly income on needs, 30pc on wants and saving the remaining 20pc, in her book All Your Worth: The Ultimate Lifetime Money Plan, after her experience of her own parents struggling financially when her father lost his job.<\/p>\n

Imbued with a mission to lift people out of poverty and help them manage their money, the trend has become, well, trendy again after social media jumped on the financial bandwagon.<\/p>\n

There are countless influencers claiming the slogan as their own, but what does it really mean, and should you follow it?<\/p>\n

In theory it makes sense. Half your net income every month probably will be spent on a roof over your head, your utilities, insurance, transport and food: the basic necessities of life.<\/p>\n

\"The<\/p>\n

The 50\/30\/20 rule divides monthly income into three broad categories. Photo: Getty<\/p>\n

But what if you think your daily non-fat-soy-latte and Pilates membership is central to your soul? What if you simply can\u2019t live without your gym, or Netflix subscription?<\/p>\n

That\u2019s where it can break down. The blurring of needs into wants is a fine line. And who has money for savings these days?<\/p>\n

How to follow the 50\/30\/20 rule<\/p>\n

The answer lies in automation. Your bank is the link. They allow you set up free savings accounts, vaults, pockets or jars where you can send some of your cash on pay day. The answer lies, according to experts, in \u201cpaying yourself first\u201d.<\/p>\n

That means, by standing order or bank transfer, you arrange, every single month, for money to be scooped into a range of savings buckets which are named and purposed for specific things, in the three days following pay day.<\/p>\n

You might have one for holidays, another for kids, or Christmas, or car maintenance. A key one is the household fund, to cover bills and expenses.<\/p>\n

By streaming money in on payday, it keeps your goals alive, but you can always \u201csteal\u201d it back if there\u2019s an emergency.<\/p>\n

50pc for needs <\/p>\n

These are, according to Investopedia, the essentials for survival. It\u2019s rent\/mortgage, groceries, insurances, servicing debt and utilities.<\/p>\n

\u201cConsider either cutting down on wants or trying to downsize your lifestyle if you’re spending more than 50pc on your needs,\u201d it says.<\/p>\n

\u201cThis might mean downsizing to a smaller home or a more modest car. Maybe carpooling to work or cooking at home more are solutions.\u201d <\/p>\n

I\u2019d add shopping around for a new energy provider every year, and using a broker for insurance.<\/p>\n

30pc for wants<\/p>\n

We all want everything. Identifying what\u2019s a reasonable expectation (think a summer holiday rather than a yacht, or new clothes instead of a Chanel bag), and you get the picture.<\/p>\n

Wants include things like restaurants, gifts, streaming services and gadgets \u2013 basically the things that make life fun.<\/p>\n

It\u2019s important to keep from straying into \u201cneeds\u201d. You don\u2019t need Spotify, or a 252-registration car. They\u2019re a \u201cnice to have\u201d.<\/p>\n

20pc for savings<\/p>\n

Savings are a good idea, and Irish people are really good at it. There\u2019s over \u20ac160bn on deposit in bank accounts, deposits and Post Office accounts. That\u2019s far more than we collectively owe.<\/p>\n

Most people have savings (earning little or nothing) and debt (costing a lot), as a \u201cjust in case\u201d.<\/p>\n

That\u2019s fine, to a point.<\/p>\n

How about directing your savings for a specific purpose and time? That means you control them, and have goals for your money which you\u2019re more likely to achieve.<\/p>\n

Calling a savings account \u201cMy New Car\u201d, or \u201c2026 Holiday\u201d and purposefully putting money in every month under the \u201cpay yourself first\u201d principle makes you more likely to achieve your goal and less likely to dip into it for an impulse purchase.<\/p>\n

Have as many accounts as you have savings goals: they\u2019re free to add once you have a current account. Personally, I have four, all named.<\/p>\n

If you need to mind yourself from your inner thief, set them up outside of your bank.<\/p>\n

State Savings products are great as they have a fixed term (three to 10 years), are 100pc guaranteed, earn tax-free interest and you can\u2019t get at them until the term is up.<\/p>\n

This category crucially includes saving for the future you \u2013 your pension contribution.<\/p>\n

\"Giving<\/p>\n

Giving your savings account a specific purpose will make you less likely to dip into it. Photo: Getty<\/p>\n

50\/30\/20 example<\/p>\n

Earnings after tax: \u20ac3,600 per month<\/p>\n