🪙 I. Introduction

Do you ever wonder where your salary disappears before the month ends? You start with good intentions — maybe even try a spreadsheet — but somehow, the numbers never add up.

If you’ve been looking for a simple, stress-free way to manage your money, the 50/30/20 rule might just be your financial game-changer. It’s a budgeting formula trusted by financial planners worldwide and loved by young professionals because it’s easy to follow and works with any income level.

In this guide, we’ll break down exactly what the 50/30/20 rule is, how to use it to manage your salary better, and how Finwise can help you automate it so you never have to manually track your expenses again.

📘 II. What is the 50/30/20 Rule?

The 50/30/20 rule is a simple budgeting method that divides your take-home income into three clear categories:

• 50% – Needs: Essentials like rent, groceries, transportation, EMIs, and utility bills.

• 30% – Wants: Lifestyle choices such as dining out, entertainment, travel, and shopping.

• 20% – Savings & Investments: Emergency fund, SIPs, mutual funds, or debt repayment.

Think of it as a financial blueprint that ensures you enjoy your money today while still building wealth for tomorrow.

For example, if your monthly take-home salary is ₹60,000:

• ₹30,000 (50%) → Needs

• ₹18,000 (30%) → Wants

• ₹12,000 (20%) → Savings & Investments

That’s it. No complicated math, no spreadsheets, no guilt trips.

💡 Pro Tip: Start with approximate percentages — even if you save only 10% at first, consistency matters more than perfection.

📊 III. Why the 50/30/20 Rule Matters

The biggest struggle for most people isn’t earning money — it’s managing it wisely.

Following the 50/30/20 budgeting rule gives you structure, balance, and awareness. Here’s why it’s powerful:

1. Prevents Overspending: By setting clear limits, you control lifestyle creep — the silent killer of savings.

2. Builds Financial Discipline: You learn to separate needs from wants, a skill that compounds over time.

3. Encourages Saving Early: Saving 20% of your income builds an emergency fund and starts your investment journey.

4. Adapts to Any Income: Whether you earn ₹25,000 or ₹2 lakh, the formula scales perfectly.

According to a Reserve Bank of India (RBI) study, over 75% of Indians do not track monthly expenses, and only 30% invest regularly — the 50/30/20 rule helps bridge that gap effortlessly.

🔢 IV. Step-by-Step Guide: How to Use the 50/30/20 Rule

Let’s walk through how you can apply this rule practically — and start today.

Step 1: Calculate Your Net Income

Use your take-home pay after tax deductions, PF, and insurance. This is the real amount you can budget.

Example: ₹70,000 salary → Net ₹65,000 after deductions.

Step 2: Allocate 50% to Needs

List essentials:

• Rent or mortgage

• Groceries

• Electricity, water, Wi-Fi bills

• Transportation / fuel

• EMIs

🧮 Example: ₹32,500 for needs

If your needs exceed 50%, don’t worry — start by adjusting your wants until your essentials fit better over time.

Step 3: Allocate 30% to Wants

Wants make life enjoyable — but they need limits.

• Dining out

• OTT subscriptions

• Shopping / entertainment

• Vacations

🧮 Example: ₹19,500 for wants

Finwise helps you automatically track and categorise these expenses once you connect your bank account.

Step 4: Allocate 20% to Savings & Investments

Use this for:

• Emergency fund (target: 6 months of expenses)

• SIPs or mutual funds

• Debt repayment

• Long-term goals (house, education, retirement)

🧮 Example: ₹13,000 savings & investments

💡 Even investing ₹5,000/month in SIPs can grow to ₹20 lakh in 15 years (at 12% CAGR).

Step 5: Automate Everything with Finwise

Manual tracking is hard. Automation keeps you consistent.
Finwise lets you:

• Link your bank accounts securely

• Track spending automatically

• Set custom 50/30/20 budgets

• Get alerts when you overspend

• Auto-invest based on your goals

⚠️ V. Common Mistakes to Avoid

1. Ignoring Irregular Expenses: Annual fees, insurance, and festival spending count too — plan for them.

2. Being Too Strict: The 50/30/20 rule is flexible. Don’t obsess over exact numbers; adjust as life changes.

3. Skipping the Savings Step: Many start budgeting but delay saving — set up an auto-transfer to avoid temptation.

4. Not Reviewing Monthly: Recalculate every 3 months to match your current income and goals.

⚙️ VI. Tools, Automation & How Finwise Makes It Easy

With Finwise, you don’t need Excel or manual entries.

Once you connect your bank account, Finwise automatically:

• Categorises your transactions into Needs, Wants, and Savings

• Tracks how close you are to your 50/30/20 balance

• Gives visual insights on where your money goes

• Helps you set savings goals like “Emergency Fund” or “Vacation Trip”

• Recommends AI-driven investment plans based on your budget and goals

It’s like having a personal finance assistant in your pocket — available 24/7.

“With Finwise, I saved ₹1.2 lakh in 8 months without cutting out coffee or Netflix — just smarter budgeting.” — Ritika, Finwise User

💡 VII. Real-Life Example

Let’s look at a realistic case:

Rohan, a 27-year-old marketing professional, earns ₹80,000/month.
Before Finwise, he saved irregularly and couldn’t track spending.
After setting a 50/30/20 rule budget inside Finwise:

• ₹40,000 → Needs

• ₹24,000 → Wants

• ₹16,000 → Savings & Investments

After 6 months, Finwise insights showed he overspent on takeout by ₹5,000 monthly.
He adjusted — and redirected it to his SIP plan.
Now, Rohan’s savings rate is up 25%, and he’s on track for his ₹10 lakh goal in 4 years.

🏁 VIII. Conclusion & Call-to-Action

The 50/30/20 rule is not about restriction — it’s about balance and awareness.
It helps you enjoy your money today while building financial freedom for tomorrow.

If you’ve struggled to save, budget, or keep track of where your salary goes, this simple framework is your first step toward control.

And with Finwise, you can automate everything — from expense tracking to goal-based investing — in one app.

💡 Create your own budget in minutes with Finwise and start mastering your money today.

🌐 External Links

• Reserve Bank of India – Household Finance Report

• SEBI – Mutual Fund Education Portal