What is the 50/30/20 rule?

It may sound a bit dull, but budgeting can make your financial position better in a short period of time. By making a good plan, you will open doors and feel a burden fall off your shoulders in amazingly simple ways. Even if you are not currently feeling financial pressure, you can still improve your financial picture with the 50/30/20 rule. This method of budgeting is a way to get your expenses in line with your income. Stop using difficult methods and start gaining insight!

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The 50/30/20 rule in a nutshell

Most people get their income credited to their account on a monthly basis. You divide this net income into several (imaginary) pots, namely:

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• 50% of your net income goes to fixed expenses;
• 30% of your net income is for your personal needs;
• 20% of your net income is for debt repayment, as well as savings and investments.

This is what your cashbook will look like starting next month

How does this form of budgeting work and how do you start it? If you want to live healthier you better start today, but the 50/30/20 rule is best put into practice at the beginning of the month.

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According to the Nibud, half half of our income goes on fixed expenses. Fixed charges are recurring major expenses, such as your rent, mortgage, health insurance, energy bills and groceries. With an average net monthly income of €2,500, you have €1,250 per month for your fixed expenses.

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The other half is for the other two categories. If we stay with the monthly income from above, that leaves €750 for personal needs and €500 for savings and debt repayment. To fully understand your cashbook, use our handy spending plan.

Use this handy roadmap for your unique situation

With a spending plan you can really make strides. This time no complicated plan with difficult formulas, but a simple set-up with maximum results. Let's get started right away and improve your financial position. 

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1. Make a list of all your income. Consider your own salary, that of your possible partner, additional earning models and perhaps passive income;
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2. Make a list of all your monthly expenses. Grab your bank statements or your banking app and take a look at your household expenses. Think about your rent, car expenses, health care costs, insurance premiums, sports subscriptions and Netflix;
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3. Now chart the variable costs. These are the Starbucks coffees, vacations, impulsive purchases and outings with friends. Look them up in your banking environment and list these too;
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4. Divide spending into categories. Which items are mandatory or important, which ones make you feel good, and what are the perks you can also do without? If you can cut costs, that's a good thing;
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5. Subtract expenses from your income. Maybe you're holding over, maybe you're short or you'd just like to see more slack.

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Whatever your situation: you now know what to work on! The 50/30/20 rule offers a solution for everyone, in every situation. By taking control you work on overview and clarity. You map out the pain points yourself with our spending plan, so you know how to take better care of yourself. Not only for the you of today, but also for the you of tomorrow. Good luck!