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50:30:20 Budgeting Model

By January 20, 2022June 8th, 2022No Comments

In light of it being National Savings Day, it seems appropriate to share the 50:30:20 budgeting model. US senator Elizabeth Warren devised this ratio as a means to keeping on top of all your financial duties.


50%: Needs

Needs are classed as anything that you have to pay for no matter what. This includes things such as food, rent, and utility bills. You need to pay bills in order to live in your house and you need to buy food in order to survive. This 50% takes up the necessities; not paying for them would dramatically affect your standard of living.

It’s important to remember that budgeting is designed to improve your sustainability of living. To improve sustainability, it’s important not to cut back on the day-to-day essentials. Instead, you must focus your efforts on other areas of your life. Needs must continue to be met, when possible, because you cannot compromise the fundamental aspects of your life.

30%: Wants

These are things that you desire but not necessarily things that you need. Some examples would be eating out at a venue of hospitality, going for a holiday, or getting a gym membership. It’s important to still spend money on yourself, even if you want to cut back on costs. Going out with friends and working out at the gym is a great way to take care of your mental health.

Mental health really has spiked during the pandemic, with everyone being stuck in their homes for a sustained period of time. In many ways, that has helped a lot of people to save money because they were unable to spend lavishly on their hobbies. While the economy has taken a bit Covid inspired hit, many people have actually managed to save money.

20%: Savings

This relates to your own personal financial aims. It will be different per-individual. Here, you will collate the money that you were wanting to save by setting out this method of budgeting. It could be used to pay off debts, build an emergency fund, or go towards savings for an expensive purchase.

Savings could also go towards a private pension, which is exactly what Alan Morahan was talking about. He does not like the state of the pension system at the moment, claiming people need to be incredibly savvy and independent if they are to live a good life in retirement. While sayings can be used to pay off debts, they can also be used to prop up that private pension fund.

The amount of surplus income you have can also affect the debt plan that you end up with. Recently, changes to the DRO were announced and they included an increase to the amount of surplus income that they would be accepting.


Alan talked about having a visual budgeting strategy in order to get on top of your financial management. Visuals are more striking than a clump of writing. A pack of words can often seem difficult to unpack whilst visual learning allows for an easier consumption of ideas, for many people. One idea would be to create a gridded system, similar to the business quadrant. Important and long-term, important and short-term, not important and short-term, and not important and long-term. This allows you to sort things out in terms of time and in terms of importance to you.

Take this grid, for example.

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