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What is the 50/30/20 budget?

What is the 50/30/20 budget?

This budget gives you parameters to operate in and certainty about where your money is going.

03 March 2020 · 4 min read

(This post is for Australians who have their superannuation and tax payments covered by their employer).

The 50/30/20 budget is where you split up your income into:

  • 50% needs (groceries, rent, utilities, health insurance, repayments);
  • 30% wants (shopping, dining out, hobbies); and
  • 20% savings.

This method is an easy way of managing your money. It gives you parameters to operate in and certainty about where your money is going.

"A budget is telling your money where to go instead of wondering where it went."   - Dave Ramsey.

For example:

If you earn $1,500 a fortnight, every time you get paid you split your income out like this:

  • $750 covers your rent for the fortnight;
  • $450 allows you to go out and enjoy yourself; and
  • $300 is put away in savings.

Here is a percentage calculator if you’re not crazy about maths.

How to set up.

Thinking about money all the time is incredibly dull, so it’s much easier to automate this system.

Most online banks have a function allowing you to set up automatic payments. If in doubt, stroll on into your local bank branch and ask them to help.

They’ll be glad for something to do!

We suggest setting up two extra bank accounts (in addition to the one you get paid into).

Do the maths on what your 50/30/20 split will look like, and then set up automatic transfers for the day after you get paid. Direct the money into your new bank accounts.

Tip: Most banks allow you to hide accounts from your banking screen. If you hide your savings account, we believe that it’s less likely you’ll be tempted to use that money. You’ll be surprised at how quickly money builds up when you’re not thinking about it!

Like everything in life, practice makes perfect. It might take a few pay cycles (weekly, fortnightly, monthly) to get into the swing of things, but the 50/30/20 budget is a powerful way to build up money and stay out of debt once you get the hang of it.


  • 50% needs (such as groceries, rent, utilities, health insurance, repayments);
  • 30% wants (such as shopping, dining out, hobbies); and
  • 20% savings.

50%: Your needs

Deciding between needs and wants is up to you, but it’s important to remember this budget is to help you.

So if you’re mixing up your needs and wants just so you can have another beer at the cricket, remember you’re chipping away at your overall financial wellbeing. It’s unlikely anybody else cares very much.

Needs are basically any payment that would severely impact your quality of life, such as rent, electricity, prescription medicines, that kind of stuff.

Note: We consider paying off debt or your credit card to be a need, because if you don’t, you might end up paying lots of interest and developing a bad credit rating.

At Spaceship, we argue paying your credit card minimum is a need and the rest (any amount you choose to pay on top of that) comes from your 20% debt and savings bucket.

That might look like this:

If your minimum credit card payment required is $25 and you want to pay $100 that month to keep the balance under control, that additional $75 comes instead from your 20% stream (see below).

30%: Your wants

Yes fantastic.

Prada. Weekend trip to Tokyo. Weekly manicures. Italian restaurants.


But rather than extravagances, the ‘wants’ section is mostly about covering the basic niceties of life you enjoy. These are things like new clothes, hair cuts and sure, maybe your Xbox Live subscription.

Sure, if you’ve got enough to cover a weekend jaunt to Tokyo, go for it!

But we believe that the power of the 50/30/20 budget is it puts into sharp focus what you can and can’t afford. When your money is all lumped together, it may be easy to think we can afford way more things than in reality. That’s when we may get into trouble.

Note: You might spend more on “wants” than you think. We find that this is the trickiest section to adjust to.

20%: Your savings and debt

At Spaceship, we argue that it’s worth paying down your credit card as quickly as possible and developing habits that mean you can happily live without owing money to your credit provider..

As such, when you begin directing 20 per cent of each pay cheque to a savings account we think its good practice to use it to pay off any past debt.

Credit card payments, car repayments, personal loans, loans from friends and family, library fines, car fines, student loans (that aren’t HECS).

These are all debts that make it difficult for you to build wealth over time, because many of them carry interest charges.

Interest is the money you pay for the convenience of borrowing that money in the first place. And over time it can really add up.

So once you get rolling on your 50/30/20 budget, we believe that you should use your 20 per cent section to cover off debts and only then should you begin your savings program.

Because you’ll have slogged out that debt, you may be amazed at how quickly that savings balance can grow. And we believe that having that kind of backstop is an incredibly powerful motivator and mentally helpful tool to have as you grow and your circumstances change.

Give it a go

It doesn’t take much time to set up the 50/30/20 budget and the sooner you start it, the soon you can start moulding your behaviour.

Being financially competent is remarkably sexy. And you never know, Prada, Tokyo and Italian dinners might be more attainable than you think.

The information in this article is prepared by Spaceship Capital Limited (ABN 67 621 011 649, AFSL 501605). It is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.

Jessica Sier is a financial journalist. Prior to that she led content at Spaceship and was a reporter at the AFR where she discovered that breaking down financial jargon was a public good.

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