A few days ago, I sat down to review my May budget. My main focus was on savings and investments—and that inspired me to write this short blog post. I believe I’ve found what feels like the “perfect formula” for managing my personal finances.
But here’s the truth: there’s no such thing as a one-size-fits-all budgeting rule.
We call it personal finance for a reason—it’s personal. Everyone has unique goals, priorities, values, and lifestyles. That’s why your approach to managing money should reflect who you are. Let’s explore this topic a little deeper.
What Is the 50/30/20 Rule?
One of the most well-known budgeting strategies in the world of personal finance is the 50/30/20 rule. If you haven’t come across it yet, here’s a quick breakdown:
- 50% for Needs: This covers all essential expenses—housing, utilities, groceries, transportation—anything you can’t reasonably live without.
- 30% for Wants: These are the nice-to-haves—dining out, entertainment, hobbies, and other things that add joy to your life but aren’t strictly necessary.
- 20% for Savings and Debt Repayment: This category includes emergency funds, retirement savings, investments, and paying off debt.
It’s a simple framework and a solid starting point for anyone just getting into budgeting.
Why the 50/30/20 Rule Might Not Be Right for You
While I do like the 50/30/20 rule as a beginner-friendly guideline, I think that’s where its usefulness ends. It’s too generalized and doesn’t account for individual circumstances.
Here’s what I find limiting:
1. It Ignores Income Differences
Spending 50% of your income on “needs” looks very different if you make €1,000 a month versus €10,000. Do your needs truly grow tenfold just because your income increases? Probably not.
This kind of thinking can push us into lifestyle inflation—bigger homes, flashier cars, and higher expenses, just because we can afford them. But that might harm your long-term financial health.
2. Only 20% for Savings and Debt Repayment?
In my opinion, that’s too little—especially if you’re serious about building financial security. Personally, I’ve flipped the script and swapped the “wants” and “savings” categories.
My Personal Budgeting Formula: 45/55
So, do I follow the 50/30/20 rule? Nope. Here’s how I budget my income:
- 45% for Needs and Wants:
- Around 35% goes to essential expenses (needs).
- 10% is for discretionary spending (wants).
- 55% for Savings, Investments & Debt Repayment:
- About 30% goes toward savings and debt.
- The remaining 25% is allocated to investments.
I used to invest a bit more aggressively (30%), but with rising economic uncertainty, I adjusted. This formula reflects my conservative nature and my focus on long-term financial sustainability.
This setup may not work for everyone—and that’s okay. It works for me.
How I Got Here: Trial, Error, and Adjustment
I arrived at this approach through good old-fashioned trial and error. Over the years, I’ve experimented with different budgeting models—some worked, some didn’t.
I’m always open to change. If my needs or goals shift, I’ll adapt my budget accordingly. Life is dynamic, and our personal finance strategies should reflect that.
A rigid formula, no matter how popular, won’t serve you if it doesn’t evolve with your reality.
Final Thoughts: Your Budget Should Work for You
Don’t treat budgeting as a constraint. Think of it as a tool for prioritizing what matters most to you.
If you’re just starting out, the 50/30/20 rule is a great entry point. But as you learn more about yourself—your goals, values, and financial situation—don’t hesitate to craft a system that works uniquely for you.
And when in doubt, don’t be afraid to reach out to a certified financial professional. They can help you create a personalized roadmap for financial success.
But most importantly—start. Don’t delay building your best financial life.
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Keywords: budgeting tips, personal finance strategy, how to budget money, 50/30/20 rule, alternative budgeting methods, financial planning, personal budgeting formula, savings and investment tips, financial wellness, budgeting for beginners
Disclaimer:
I am not a financial or investment advisor. The content of this post represents my personal views and is purely informational. It should not be taken as financial or investing advice. Please do your own research and consult with a qualified financial advisor before making any investment decisions.
Disclaimer on the use of AI: Some of the information may be generated by using AI. Always double check the information and do your own research.
