Wednesday, March 22, 2023

50:30:20 Savings Rule. Consume 50%, Luxury 30%, Save & Invest 20%

By Benson Bundi

The 50:30:20 savings rule is a great way to grow your wealth exponentially. It’s a great budgeting and savings tool for people who don’t have time to track all their spending.

Here’s how it works:


According to the rule, 50% of your income should go towards your needs, i.e., regular living expenses. These include groceries, rent, health insurance, and electricity bills.

Basically, a need is something that would greatly inconvenience you or something you can’t live without – such as food, shelter, and clothing.

Financial experts advocate that wants should not exceed 50% of your monthly income. If they do, something is likely wrong. It would help to track your expenditure to get a good picture of where your money goes.

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You can then adjust your needs by reducing unnecessary expenditures. Once your budget matches the 50% limit, you can proceed to the next step.

You want to limit your needs and carefully analyze what you spend your salary on in this category. You can save on food costs by:

  • Buy in bulk: You can link up with friends and buy goods in bulk. Instead of buying things at the estate shop, visit marikiti markets where goods are cheaper.
  • Maximize leftovers: Finish all the food in the fridge instead of disposing of it. For instance, consume supper leftovers for lunch, so you only cook two meals daily. This will save you so much money.
  • Get alternatives: Instead of getting all your proteins from meat, look for alternatives such as lentils, fermented milk, beans, eggs, etc.
  • Take advantage of offers: For example, buy one get two free, mostly spaghetti. Ideal for non-perishable goods like spaghetti, Weetabix, and cooking oil, which doesn’t spoil quickly.


Having done with needs, 30% of your income should go towards wants or discretionary items. The financial expert defines a want as something that causes a minor inconvenience in your life.

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Unlike needs, you can survive fairly comfortably without wants. Examples of wants include a Netflix subscription, fancy clothes and shoes, fine dining, Wi-Fi, etc.

Also, stay off money-draining habits such as betting and gambling.

Savings, Debts, & Investment

20% of your income should go towards savings and paying off debts. In this category, your money should go towards emergency funds, paying off debts, and retirement savings.

You can also use the money for investment. If you feel that the 20% isn’t enough, consider transferring more money from your wants list.

Alternatively, consider increasing your income by requesting a raise in work or switching companies to one that pays a better salary.

How to use envelope method to budget and save your money

A simple debt repayment strategy is to start by paying off smaller debts while making minimum payments on larger debts.

For loans, consider paying off the ones with high interest first, then work down to those with low-interest rates.

You can also take up a side hustle to provide a new income stream outside your primary job.


The 50:30:20 rule is great as it helps you track your expenditure quickly. Having the three income categories creates a structure that is easy to follow and helps one focus and manage money better.

It’s also less detailed, making it ideal for busy individuals. The rule works well for people on low-income budgets.

It’s, however, not ideal for high-income earners as they would be forced to spend unnecessary money on needs.

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