If you're interested in budget management, one of the best-known rules is the 50/30/20 rule. We'll analyze the essentials of this rule. Understanding the 50/30/20 rule to manage your budget 😉

What is the origin of the 50/30/20 rule? 🧐

This rule comes from the book that was written by Elisabeth Warren. Former professor at Harvard University, specializing in commercial law1.

👉 Note that this book has become a reference concerning budget management ❗

In her book, she understood the importance of managing one's money wisely. Regarding personal finances, It is advisable to apply the 50/30/20 rule.

• 50% essential expenses
• 30% pleasures
• 20% savings and investments

Note that I explain these expenses better in my article”How to organize expenses”.

VHere is what the different expenses correspond to.

• Essential = Mandatory expenses
• Pleasures = Spending on well-being
• Savings / Investments = Money reserve or future income

Therefore, here is a table to illustrate the different expenses.

Essential	Pleasures	Savings / Investments
Rent	Vacation	Saving
Races	Restaurants	Investments
Transportation	Subscriptions	3a

How to calculate the 50/30/20 rule? 🤨

1. You calculate your total income. For example, salary, dividends or subsidies.
2. Each expense, you put in one of 3 categories. Essential expenses, pleasures or savings / investments. Exactly as I sorted the table before.

Next, you will need to know how to use a simple rule of 3.

For example, if you want to calculate the 50% for essential expenses. The rule is:

👉 Income x 50: 100

Regarding the rule of 30 or 20. You replace the 50 with 30 or 20.

Here is a table to give an example 😊

	Essential (50%)	Pleasures (30%)	Savings / Investments (20%)
Income = 4000 CHF	2000 CHF	1200 CHF	800 CHF

What is my opinion on this 50/30/20 rule?

In my opinion, this rule makes sense. And I find it very effective for those who are new to personal finance 👍

Indeed, if you don't know how to manage a budget. Why not take inspiration from this rule?

On the other hand, I think that this study is not conducive to:

• People with high incomes
• People with average income and small expenses

I'll give you my example; at the time of writing, my budget management is approximately:

• 45% essential expenses
• 15% pleasure expenses
• 40% savings/investments

Which means that my percentage between pleasures, savings and investments is far from the figures of the 50/30/20 rule.

However, I don't have a high income and I regularly feel happy with my consumption 😎.

Is the 50/30/20 rule suitable for everyone?

No, and that's normal! This rule is a generalized basic framework, but it can (and should) be personalized according to :

• Your income If you win 10,000 CHF/month, 50% for essential expenses may be too high (unless you live in the center of Dubai!).
• Your lifestyle If you are minimalist, you can reduce “pleasures” to 10–15% and increase savings to 30–40%.
• Your goals : If you want to become financially independent, You can aim 20% of essential expenses, 10% of pleasures and 70% of savings/investments (as in the method FIRE).

Concrete example :

Profile	Essential expenses	Pleasures	Savings/Investments
Beginner	50%	30%	20%
Minimalism	45%	15%	40%
High income + FIRE objective	30%	20%	50%

How to apply the 50/30/20 rule on a daily basis?

Step 1: Track your spending for 1 month

• Use a Excel spreadsheet (like the one you're suggesting). a app (YNAB, MoneyMoney) or artificial intelligence.
• Classify each expense in one of the 3 categories.

Step 2: Adjust if necessary

• If your essential expenses exceed 50%, seeks to reduce:
  • Rent Moving out or sharing accommodation?
  • Races Buy in bulk, avoid waste.
  • Insurances Compare offers.
• If your pleasures exceed 30%, Ask yourself:
  • “Does this expense really make me happy?”
  • “Can I replace it with a cheaper alternative?” (e.g., cooking instead of going to a restaurant).

What if the 50/30/20 rule doesn't work for you?

Don't panic! Here 3 alternatives to adapt the method:

1. The 60/20/20 rule (for low incomes):
   • 60% essential expenses (if you live in an expensive city).
   • 20% pleasures.
   • 20% savings/investments.
2. The 40/30/30 rule (for minimalists):
   • 40% essential expenses.
   • 30% pleasures.
   • 30% savings/investments.
3. The “Pay Yourself First” method” (for investors):
   • First, save/invest 20–30% of your income as soon as you are paid.
   • Afterwards, uses the remainder for essential expenses and pleasures.

Are you looking for financial tools to help you?

1. Excel spreadsheet I created one in my article on how to manage your budget
2. Applications :
   • YNAB (You Need A Budget): For ultra-precise tracking.
   • MoneyMoney (for the Swiss): Simple and effective.
3. Books :
   • “Do you really need it?” by Pierre-Yves Gomez (to think about your spending).
   • “50 tips for saving money in Switzerland”" – of myself. .

Understanding the 50/30/20 rule to manage your budget

FAQ – Understanding the 50/30/20 rule for managing your budgett

What is the 50/30/20 rule?

The 50/30/20 rule is a simple and effective method to manage one's budget, popularized by Elizabeth Warren (former Harvard professor). It consists of distributing one's income in 3 categories :

• 50% for essential expenses (rent, groceries, insurance, transportation).
• 30% for pleasure (restaurants, holidays, subscriptions, leisure activities).
• 20% for savings and investments (3rd pillar, ETFs, savings accounts).

Why use the 50/30/20 rule?

• Simplicity Easy to understand and apply, even for beginners.
• Balance Allows you to: live well while saver and investor.
• Flexibility : Adaptable according to your income and lifestyle.

How do you calculate the 50/30/20 rule?

1. Calculate your net monthly income (salary, dividends, subsidies).
2. Divide it into 3 categories :
   • Essential expenses : Income × 50 / 100.
   • Pleasures : Income × 30 / 100.
   • Savings/Investments : Income × 20 / 100.

Example :
If your income is 4,000 CHF/month :

• Essential expenses : 4000 × 50 / 100 = 2,000 CHF.
• Pleasures : 4000 × 30 / 100 = 1,200 CHF.
• Savings/Investments : 4000 × 20 / 100 = 800 CHF.

🏠 Which expenses fall under the category “Essential” (50%)?

• Rent or mortgage.
• Grocery shopping.
• Bills (electricity, water, gas, internet).
• Insurance (health, home, car).
• Transportation (petrol, public transport passes).
• Taxes and duties (e.g., Serafe in Switzerland).

What expenses fall under the category “Pleasures” (30%)?

• Restaurants, bars, cafes.
• Holidays and travel.
• Subscriptions (Netflix, Spotify, fitness).
• Shopping (clothes, gadgets, leisure).
• Outings (cinema, concerts, activities).

What expenses fall under the category “Savings/Investments” (20%)?

• precautionary savings (for unforeseen circumstances).
• Investments :
  • Swiss : 3rd pillar (Viac, Finpension).
  • Europe : Global ETF (e.g.: Vanguard FTSE All-World).
  • USA : S&P 500 ETF (e.g., VOO).
• Future projects (property purchase, studies, etc.).

🤔 Is the 50/30/20 rule suitable for everyone?

No, this rule is a general framework which can be adapted according to :

• Your income If you win 10,000 CHF/month, 50% for essential expenses may be too high.
• Your lifestyle If you are minimalist, You can reduce pleasures to 10–15% and increase savings to 30–45%.
• Your goals If you're aiming for the’Financial Independence (FIRE), You can aim 20% of essential expenses, 10% of pleasures and 70% of savings/investments.

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📌 How to apply the 50/30/20 rule on a daily basis?

1. Track your spending for 1 month :
   • Use a Excel spreadsheet or a app (YNAB, MoneyMoney).
   • Classify each expense into one of the 3 categories.
2. Adjust if necessary :
   • If your essential expenses exceed 50% :
     • Reduce your rent (moving, shared accommodation).
     • Optimize your shopping (buy in bulk, avoid waste).
     • Compare your insurance policies.
   • If your pleasures exceed 30% :
     • Ask yourself: “Does this expense really make me happy?”
     • Replace unnecessary expenses with cheaper alternatives (e.g., cooking instead of going to a restaurant).

⚠️ What if the 50/30/20 rule doesn't work for me?

Don't panic! Here 3 alternatives :

1. Rule 60/20/20 (for low incomes or expensive cities):
   • 60% essential expenses.
   • 20% pleasures.
   • 20% savings/investments.
2. 40/30/30 rule (for minimalists):
   • 40% essential expenses.
   • 30% pleasures.
   • 30% savings/investments.
3. “Pay Yourself First” Method” (for investors):
   • Savings/investments 20–30% of your income as soon as you are paid.
   • Use the remainder for essential expenses and pleasures.

🛠️ What tools should be used to apply the 50/30/20 rule?

• Excel spreadsheets Download the one I suggest in my article. How to organize expenses.
• Applications :
  • YNAB (You Need A Budget): For ultra-precise tracking.
  • MoneyMoney (for the Swiss): Simple and effective.
  • BudgetBakers : To visualize your expenses in graphs.
• Books :
  • “Do you really need it?” of Pierre-Yves Gomez (to think about your spending).
  • “50 tips for saving money in Switzerland” (from myself).

💡 What is your opinion on the 50/30/20 rule?

This rule is excellent for beginners in budget management, because it offers a clear and simple framework. However, it is not universal :

• In my opinion, the distribution is rather 45% essential expenses / 15% leisure activities / 40% savings/investments.
• For what ? Because I prioritize savings and investments to reach my financial goals faster.

In summary The 50/30/20 rule is a good base, but personalize it depending on your situation!

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Overall, this blog lives on sharing a frugal and minimalist lifestyle.

For a question of transparency towards the readers. All recommended products are in order to make life cheaper, simpler and to promote the essentials.

Basically, my only income with this blog comes:

• Trainings that I realize
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• Donations that readers make in exchange for neutral information.

About me

I decided to create this blog to develop and help readers who are looking for a simpler and more economical life.

Compared to before, I was a person who consumed a lot until the day I realized that my consumption made me sadder and poorer 😑

Now I prefer the minimum of my needs to be happy and achieve my financial freedom.

Without realizingI started to focus on saving and investing to depend on a boss for as little time as possible and to speed up my personal projects.

For several years I have felt happy and I have become richer in a way that I would never have imagined given that I have an average salary in Switzerland.

What is the goal with this blog?

The goal is to share and learn with others who seek freedom and simplicity 😉

Are you rather minimalist or frugal Jonny?

I am as minimalist as I am frugalist. However, there are situations where I lean more towards an art of life.

To conclude, I think the most important thing is to feel comfortable in your lifestyle 😊

Understanding the 50/30/20 rule to manage your budget