The 50-30-20 rule is a very simple and widely known way to manage money. It suggests dividing your monthly take-home salary into three parts:
50% for Needs – Essentials like rent, groceries, and bills.
30% for Wants – Fun things like shopping, eating out, and entertainment.
20% for Savings – Future goals, investments, or paying off debt.
This method helps you spend wisely while also saving for the future!
Let’s understand 50-30-20 Rule with help of a simple story.
It was the first week of the March month, and Amit had just received his first salary. Feeling like a king, he celebrated by ordering a large pizza, but just as he was about to take a bite, his elder sister, Priya, smirked.
“Bhai, looks like you’re already celebrating? Hope you’ve planned how to use your salary wisely!”
Amit grinned, “I just got my first paycheck, Didi! What’s there to plan? I’ll spend some, save some, and chill!”
Priya laughed. “Beta, if you don’t plan your money wisely, you’ll be broke before the month ends! Let me teach you a simple finance rule—The 50-30-20 Rule. Think of it like making the perfect pizza!”
50% – Needs (The Pizza Base – Non-Negotiable Expenses)
👉 Half of your salary (50%) should go toward home essentials—rent, groceries, electricity bill, internet, and daily transportation. Just like the pizza base, these are the foundation of your financial life. No base = no pizza, just like no proper budgeting = money problems!
30% – Wants (The Toppings – Fun & Lifestyle Spending)
👉 30% of your salary should be used for wants—weekend getaways, Swiggy/Zomato orders, Netflix, shopping, or a new smartphone. This is like the cheese and toppings on your pizza—adds flavor, but overdo it, and you’ll burn your pocket (or the pizza).
20% – Savings & Investments (The Secret Masala – Wealth Builder!)
👉 Minimum 20% of your salary should go into savings and investments—building an emergency fund, putting money in mutual funds, stocks, PPF, FD, or SIPs. Like the pizza sauce, it may seem small, but it’s what gives your financial future the perfect balance!
Final Gyaan
Amit wiped his hands and nodded. “So, if I follow the 50-30-20 rule, I’ll have enough for my expenses, enjoy my life, and also save for the future?”
Priya smiled, “Exactly! Follow this simple budgeting hack, and you’ll never be broke by end of the month!”
Amit raised his chai. “Didi, from today onwards, I’m using the 50-30-20 rule for my salary. No more unplanned spending!”
Priya chuckled. “but, remember one thing: Salary comes every month, but smart money habits will make sure you’re never short on cash!”