When to use it
Use it when you want a simple starting structure for a budget.
How to apply it
- Work out your monthly take-home pay.
- List your essential costs, such as rent, bills, food and minimum debt payments.
- List your discretionary spending, such as eating out and subscriptions.
- Compare each total with 50%, 30% and 20% of your income.
- Adjust spending to move closer to the split, starting with wants.
Tip: Treat the split as a guide; high housing costs may make 50% for needs unrealistic at first.