Site icon CoinDCX-Blog

The 50/30/20 Rule of Budgeting Explained with Examples

What is the 50/30/20 budgeting rule?

A successful professional based out of Mumbai, Saniya often finds herself scrambling for funds during month-ends. “Where did all my money go? I haven’t even splurged this month!”, squeals Saniya as she looks through her disappointing bank statement. Well, this is not the first time since she has found herself looking at a disastrous balance sheet. 

Saniya has been part of the workforce for the past 5 years, and earned a stable income but has not been able to save significantly. Leaving aside savings, she often struggles to make basic payments at the end of the month. The last time she had to visit the dental clinic, her credit statement did not permit it. What is truly sad about this situation is that Saniya is not the only one sailing on this dwindling boat!

Today, a large population, especially beginners, cannot sustain a decent lifestyle. While we can blame the rising inflation, it pays to reevaluate poor financial planning. Instant gratification coupled with the need for social fitting is a key player. This is why it is time to be introduced to the 50/30/20 rule. Abiding by the simple rules of this method is a good way to start financial planning for beginners. Without further ado, let us take you through this beautiful money-management trick and how it works. 

What is the 50/30/20 Budget Rule?

The 50/30/20 budget rule is straightforward and does not involve mind-boggling calculations. It simply implies that you divide your post-tax income into 3 broad categories, i.e Needs, Wants, and Savings. So 50% of your income will go towards serving your needs, 30% towards fulfilling wants and 20% towards savings. Simple right? This technique works marvelously to instill a sense of financial discipline while keeping you on track. Let’s dwell on the particulars of this famous 50/30/20 rule with examples.

Needs/Essentials – 50%

Needs comprise the category of expenses that you absolutely have to make to live. This big portion of funds has to be spent on requirements that help you survive and sustain a decent lifestyle. Simply think of the basic requirements that you can not live without. Essentials will include expenditures made for paying your home rental or EMI, buying groceries, fulfilling electricity bills, transit costs for work, insurance premiums and other such costs. 

Remember, not paying these bills could disrupt your livelihood and also lead to interest surges and credit score drops. It is absolutely important to fit your essential needs within this 50% portion or you could choose to fetch some from the 30% wants category. The choice is yours. 

Wants – 30%

This is the part that you are most likely going to love. The wants fund can be used to buy things or experiences that are not necessary but bring you pleasure. This is also the category wherein you must apply utmost caution. Use this fund to pay for things like cinema trips, ordering meals, buying the latest phone, making travel trips and more. The “wants” zone is usually where people lose grip. And why would you not, who does not love the pleasures of life? 

Keep very close track of how you spend your money on materialistic goals and instant gratifying experiences. Conquering this aspect of your spending culture will indeed make your bank balance glee in joy. 

Savings – 20%

Finally, we come to the not-so-enthralling bucket. As the name suggests, you put 20% towards your savings fund. This fund is the one that will take you through difficult patches and fortify your financial future. Savings cannot be negotiated and you can use different vehicles to build it up. 

While you choose from different traditional forms of investment, the crypto market is booming. The CoinDCX investment app is a great ally and assists you in growing your crypto fund. Start your investment journey with Crypto SIPs by CoinDCX. Think of it as a recurrent investment fund where you keep adding a portion of the investment to drive greater returns. Add a good mix of investments to your portfolio. Remember, invest your savings and let them grow wealth for you. 

Read more: How to manage money in your 20s


Managing your funds as a beginner can be tricky. However, successfully implementing the 50/30/20 rule will go a long way in leading you towards financial stability. What’s more, you do not have to necessarily stick by the rule to the T. Create your iterations and spin the rule to suit your specific budget and financial goals. What is most important is to stay put with the savings tab and you are sure to be at the top of your journey on ‘financial planning for beginners. 

The idea is to exert control over your finances and not the other way around. Balancing your income well, implementing the 50/30/20 rule and making smart investment decisions is the key to living a financially-blissful life.

Stay empowered throughout your savings and investment journey with CoinDCX. Venture into your crypto investment journey with CoinDCX, India’s simplest and safest crypto investment app.   

Exit mobile version