The 50-20-30 Budget Rule and How It’ll Save Your Finances!

June 23, 2020

The 50-20-30 Budget Rule was one of the very first financial lesson I shared on SavingsPinay.50-20-30-budget-rule


It is one of the simplest and the easiest budget technique you can use to decide what percentage of your income goes to expenses, savings or others.


Instead of budgeting your income to 20 or more categories right away, you are encouraged to focus on three main categories: Essential Expenses, Financial Goals and Lifestyle Fund.


The 50-20-30 Budget Rule is also  flexible enough to match your income and lifestyle. You can change the rule to 80-10-10 or 70-20-10 depending on your financial preference. Think of it more as a guideline to strategically determine how much money you should be spending on what.


We often take budget for granted. We only create one once we are already running out of money to spend. Budgets come as an option rather than a necessity. This mindset should be changed. A good budget can make you rich in the long run. It could give you a blueprint for a stronger financial foundation.


If you ever find budgeting hard and complicated then maybe this is the post you need to read.


Read next: How to Budget for Beginners – The Ultimate Guide


Be part of the SavingsPinay Email List to download the 50-20-30 Budget Template




Getting Started with The 50-20-30 Budget Rule

Budgeting, in general, is far more than just paying your bills monthly. It is more of answering the question, “where should my money go?”.


Now, The 50-20-30 Budget Rule suggests that you essential expenses should be limited only to 50% of your net income. Your financial goals to 20% of your net income and your lifestyle wants to 30% of your net income.


Essential Expenses

When we say Essential Expenses these are your necessities, the fixed items that you certainly need to pay no matter what. Example will be your house rent, transportation allowance, food/grocery and/or utilities, electric bills.


Financial Freedom

When we say Financial Freedom these are your savings and investments. Money meant to help you towards better financial security. Count on here your debt payments, loans, savings and/or investments from different investment vehicles you own.


Lifestyle Fund

When we say Lifestyle Fund these are your “flexible spending” meant to pay for things that you personally need like hobbies, shopping and other miscellaneous expenses. Included in this is gym membership, clothing/shoes shopping allowance, etc.


How to Apply the 50-20-30 Budget Rule

The 50-20-30 Budget Rule is applicable to any amount of income since this is a percentage-based system. Whether you have an entry-level salary or already on your senior level, you can easily follow this budget rule.


To get started you need to  determine first the income you will be working with. For this we will be focusing on the net income — less government fees and deductions as well as less tithe.


If you have multiple sources of income you can either add them together or focus on your main source and save the rest as a cash cushion.


Side Note:Personally I only use this budget rule for my monthly salary. All the extra income I get from blogging, YouTube, freelance content writing and hosting weddings and events are automatically reserved for the different saving funds I own


If you're a self-employed or freelancer, then you need to be more careful in the money you'll have as your base income. Make sure that you work on the average income per month you get so that your budget can easily adjust.


Now that the net income is already determined you can now start applying the rule. Divide your income to the three main categories mentioned above: Essential Expenses, Financial Freedom and Lifestyle Fund.  Make sure that you are following the 50-20-30 Budget Rule for each category and not exceeding with the percentage allocated.






The photo below is a screenshot of The 50-20-30 Budget Rule Template. You can download for free the actual budget template on the SavingsPinay Resource Library. Access to the library is available if you join my mailing list.


Important notes to remember:

  • As mentioned earlier, the 50-20-30 Budget Rule shouldn’t be taken as is. We all have different salary, different needs and different bills to pay each month. Select a budget percentage applicable to you or to what you can commit. If you have a lot of Essential Expenses you can go 80-20 and leave Lifestyle Fund to zero.
  • Your highest priority will be the Essential Expenses and Financial Freedom. The Lifestyle Fund can pretty much adjust to your budget since it includes all the flexible items.
  • Choosing the correct budget categories is important too. Make sure that you separate your needs and wants well.



Why the 50-20-30 Budget Rule Works?

Doing the 50-20-30 Budget Rule is one of the best starting point if you want to get ahead of your finances. It is so easy to follow and you even have a FREE Template to rely on. Below are other reasons why you'll fall in love the 50-20-30 Budget Rule.

  • It teaches you to live within your means. You will realize that your income can suffice your bills, your savings and your wants as long as you budget accordingly.
  • It offers flexibility depending on your need and lifestyle. You can adjust the rule to 80-10-10 or 70-20-10 as mentioned in the beginning.
  • It reveals your spending value and who you are as a consumer. You can read more about spending habits review on this post
  • It helps you build a strong financial foundation for you and for your future.
  • It gives you an easy-to-follow system in budgeting your money. Once you get the habit of dividing your hard earned income wisely and stay consistent, you will realize how easy it is to manage your finances.
  • It will automate your savings and investment. You will get a good start on your future fund because following the 50-20-30 Rule urge you to set aside for your financial goals.


How to Make the 50-20-30 Budget Rule Work for You?

Here are helpful ways you can make the 50-20-30 Budget Rule work for you.


Find out ways to save on your Essential Expenses

Research on tips in grocery shopping and/or ways to save money on utilities. READ: No More Excuses 7 Awesome Tips That Will Help You Stop Wasting Your Money


Prioritize Your Financial Freedom Fund 

It is of high importance that you put as much amount towards your financial freedom. If you increase your income then you will have more room to save and to invest or pay your debts.


You can also use extra money from bonuses and/or gifts to fund your Financial Freedom. Start early in contributing to your savings and retirement because time is your biggest ally. Have you heard of Personal Equity Retirement Account or PERA? I have a long post about PERA you might want to read.


Take control of your Lifestyle Fund

To be honest most of us spend more on the Lifestyle Fund rather than the Financial Freedom and/or Essential Expenses. And I am guilty beyond reasonable doubt of practicing this.


However, this bad habit should stop now. Always be aware that you still have a future to take care of. If you don't save and invest now what will happen to you in 10-15 years? Think about your personal and financial goals every time.


Have a Spending Tracker at hand

Another good way to spend your money wisely is to keep a record of your expenses no matter how small or big it is. Write down how much you've spend on your commute, your lunch, your snack etc. This will enable you to really know where your money is going.




Step-by-Step Guide in Using the 50-20-30 Budget Rule

Along with this post I created a revised version of the 50-20-30 Budget Rule ready for download and use. It's still the same concept as before but only better and more appealing for the money-savvy in you.


Important notes about The 2017 Revised Edition of the 50-20-30 Budget Rule


1. It is in Excel format.

2. It includes two additional spreadsheet for “How To Use” and “Sample”.

3. It is meant to be downloaded and used. You can only print it after you have successfully placed the details of your budget for the month.


If you are already part of my mailing list you can easily login to The SavingsPinay Resource Library and download the template.


Upon successful download open the file in Excel.


The 50-20-30 Budget Rule Template is divided into three main parts.

  • Top Part is where you’ll record your chosen budget percentage and your income.
  • Below, Left side is your budget breakdown. This is where you’ll do the hardcore budgeting.
  • Below, Right side is your ideal and actual budget pie chart. This is created for you to have a visual guide on where your money is going.


Step 1. Select your budget percentage. Decide how much you will be spending on your essential expenses, financial freedom and lifestyle fund.

Step 2.Write the amount of your Net Income or Base Salary. (If you have another source of income put it on the next available column).

Step 3.Let the budget template automatically calculate for you. It will should give you the amount equal to the percentage you set.

Step 4. Now focus on your budget breakdown and start alloca start allocating your income to each budget categories. Always go below the maximum amount you can spend based on the budget percentage you commit.

Step 5.See whether your Actual Budget match your Ideal Budget. The goal is for both pie chart to look as close with each other. This will determine whether you are overspending already or not within your means.

Step 6.If your Total Essential Expenses is more than the 50% of Your Total Income then ruthlessly cut back and adjust your budget. See if there's still a way you can save to make the result even or better. Do the same for Financial Freedom Fund and Lifestyle Fund.



Final Notes from SavingsPinay

Budgeting isn’t always as complicated and stressful at it may seem. All you need is a simple method you can follow. The 50-20-30 Budget Rule offers that and more. I personally use this, and I will be the first to say that it works.


Last year a SavingsPinay Community Member shared how she use the 50-20-30 Budget Rule on handling her finances. She created her own simple template too. Here’s the photo:

Thank you Kathleen for sharing your budget template!![/caption] Try to apply this budget method this coming pay day and see how easy and simple it can be.


Related Articles:

Why I Closed My BPI Save-Up plus Insurance Account and How To Do It

The One Thing You Can Do To Start Saving Money Saving

Money for First Timers 6 Top Reasons Pinoys Find It Hard To Save Money

Are you ready to change your finances using the 50-20-30 Budget Rule?




Clariza Glino

Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at, a beauty and lifestyle blog for frugal Pinays and manages,, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>