The cost-of-living crisis is causing a real concern for many in 2023 with some struggling to get by.

As many as 3 in 5 Brits are worried that they will not have enough money to make it through the year, which is a startling figure. People are having to be very strategic with their money with inflation so high and many are turning to the 50/30/20 budgeting rule, which can help people to control their spending.

What Is The 50/30/20 Rule?

Essentially, the 50/30/20 rule involves controlling your spending by dedicating a percentage of your after-tax monthly income to 3 different categories. These are essential spending where 50% of your take-home pay goes towards essential spending or “needs”, 30% non-essential spending or “wants” and the remaining 20% goes towards savings or paying off debt.

The percentages could be adjusted, but many find that this is a healthy balance that prevents unnecessary spending and ensures that some money is tucked away each month.

Needs

The needs are the essential spending that you have to do each month. 50% of your income is a sensible amount to cover your essentials, which usually include:

• Rent/mortgage
• Bills
• Council tax
• Food
• Travel
• Insurance

Wants

You then have 30% of your after-tax pay to go towards your non-essential spending. Ideally, you will spend less than 30%, but it is helpful to have a limit in place. It is important that you are able to still enjoy your money, so it is helpful to have a set amount that you can spend each month. Non-essential spending will include things like:

• Dining out/takeaways
• Clothing
• Nights out
• Subscriptions
• Holidays
• Non-essential groceries

Savings Or Debt Clearance

You then have the remaining 20% which should either be put into savings or used to clear any debt that you have. If you are able to put away more than this then that is ideal, but at least 20% should be used for one of these purposes. If putting money into savings, it may be worth researching your options to find a savings account that yields favourable monetary returns. Particularly as interest rates are on the rise you will certainly want to find an account that will help with the growth of your savings over time.

With many households struggling during the cost-of-living crisis, smart financial management is key. It is important to control your spending and the 50/30/20 rule is a great way to do this.

When implemented, the 50/30/20 rule allows you to put your money to good use while still being able to enjoy non-essential spending. It is also relatively easy to implement and could easily be adapted based on your situation, which could help you to manage during these challenging financial times.

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