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What is the 50-30-20 rule?

The 50-30-20 rule is a simple system to help you manage your monthly budget.

It gives you a clear plan for how to divide your money for savings and other spending, to help you reach your financial goals. 

You can then decide if you’re happy with where your money is being spent or see where you can make some changes. 

In this article:

How does the 50-30-20 rule work? 

How to apply the 50-30-20 rule

Tips on how to budget and save

How does the 50-30-20 rule work?

The rule breaks down your monthly income into 3 percentage amounts:

  • 50% for needs – living expenses like mortgage/rent, utilities, food, school fees, car payments and transport
  • 30% for wants – discretionary spending like eating out, entertainment, shopping, subscriptions and family trips
  • 20% for savings or debt – put aside for your future in a savings, investment or retirement account, or to pay off money you owe

To illustrate, let’s say you earn AED 20,000 per month. Using the 50-30-20 rule, you’d allocate AED 10,000 to needs, AED 6,000 to wants, and AED 4,000 to savings or debt.

Everyone’s situation is different, so this rule may not fit your spending habits. Life in the UAE can be expensive, and you may have extra costs and challenges. Still, it’s good to have a goal to aim for. 

If you’ve had some unplanned expenses and get knocked off track, don’t let it get you down. Just try to get back on track the next month and don’t give up. It can also help to have an emergency fund to deal with unexpected costs. 

Learn more: Building an emergency savings account

How to apply the 50-30-20 rule

Start by looking at how much money comes in every month. If you’re working, this will primarily be from your salary. If your monthly income varies, work out your average income over the last 3 months. 

Next, look at your bank statements for the last 3 months, to work out your average monthly spend. You can categorise your expenses according to needs, wants, and savings. 

Work out the percentage:

  1. Divide what you spend on needs each month by your monthly income. For example: AED 10,000 ÷ AED 20,000 = 0.5.
  2. Multiply that number by 100 to get the percentage. So 0.5 x 100 = 50%

Once you’ve worked out the percentages, you can see if your spending is more or less in line with the 50-30-20 rule. If it’s not, you can make some changes.

Tips on how to budget and save

Here are some tips on how to save money from your salary:

  • Track what you spend – keep a record of every purchase, using a notebook or your banking app, and add up your expenses at the end of the month
  • Create savings goals – it helps to have a clear idea of what you’re saving for, such as a holiday, a deposit on a home, or an emergency fund
  • Create a budget – make a plan for how you spend and save your money – and stick to it
  • Pay yourself first – move 20% of your salary into a savings account when you get paid – automating this makes it easy
  • Review and adjust – keep checking to see where you can save money and allocate that to your savings or debt repayments instead

HSBC’s Affluent Investor Snapshot 2025 survey found that younger generations are more confident about their financial futures. Affluent investors, meanwhile, are putting more of their cash to work for their futures.

“Savings and personal wellbeing are now a high priority for all generations. Financial success not only helps investors reach tomorrow’s goals, but it also allows people to enjoy their lives today,” the survey found.

Takeaway

Managing your money and keeping track of your monthly expenses are key to growing your wealth. The most important step is to set aside as much as you can for savings or investments. 

The 50-30-20 rule is a simple guide to help you with budgeting and saving so you can enjoy life today and get ahead for tomorrow.

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Disclaimer

The information provided above is for general information purposes only and does not constitute legal or financial advice. HSBC Middle East makes no representation or warranty as to the accuracy or completeness of the information. You should not rely solely on this material when making a financial decision. If you have any questions or wish to discuss your specific circumstances, please reach out to us.