'Golden rule' people 'need to follow' to save hundreds of pounds each year

Money experts have urged people to follow a ‘golden rule’ for budgeting. The money saving method, known as the 50 30 20 rule, sees 50% of your income go towards "needs" such as bills and food shopping.

Meanwhile, 30% is spent on "wants" such as holidays, going out for food or anything that's not considered to be essential. The final 20% is for saving or investing.

Spencer Ayres, who goes by @ayreswealthmanagement on TikTok, offers financial advice and has gained over 1,500 followers on the platform. He has labelled the 50 20 30 rule as the ‘golden rule for budgeting’ that ‘you need to follow’.

In a recent video, he said: “If there's one thing you need to know about budgeting, it's this - the 50 30 20 rule. So, 50 percent of your income should be covering your needs. So that's your rent or your mortgage, your food shops and any other bills, anything that's essential. You should then be able to allocate 30 percent of your income towards your wants.

“That's anything that's not essential but you want to go out and do just to make life a bit more enjoyable. So that could be going on a holiday, going out with friends, going out for food, anything that's just not essential but you want to do. You should then be saving or investing the other 20%.

“Whether that's into a pension, an ISA, normal savings account, or if you have long term debt then you should be using this to pay off your debts as well. That's the 50 30 20 rule for budgeting, just make sure you stick to it and it will help you out.

Content creator Maddie Borge also uses the budget. Speaking to Gaby Mendes, who is from Wirral, on her Talk Twenties podcast this month, she said: “There’s this thing called the 20 30 50 budget.

“It’s not ideal for cities like London where my rent is like 50 to 60% of my income but it’s helpful to have a little bit of a guide as to where to spend money and where not to overspend money.

“My boyfriend works in finance but I literally made him this budget himself because I was like, we both need to get into this and we both need to make sure we’re not overspending in certain areas.”

Advice about this strategy is featured on the website of several major UK banks. Lloyds have said: “You might find sticking to the 50 30 20 rule is easier than some budget plans.

“Having only three categories to keep track of can save you valuable time and stress worrying about what to do with your pay. It also gives a balanced structure between essentials, enjoyment and planning for the future.

“The 50 30 20 rule works for any kind of budget. It’s particularly useful if you want to track your spending more closely, find new ways to manage your income or would like a clearer, more committed approach to saving.”

If your monthly income is £1,800 after tax, your 50 30 20 budget would mean you would spend £900 on needs, £450 on wants and £60 on savings.

However, the bank has stressed there are other ways to save money. It said: “Remember, the 50 30 20 rule is just one of many budgeting plans you can use to manage how you spend and save your money. So, it may not work for everyone.

“Likewise, if an unexpected expense knocks you off track for a given month, try not to let it get to you. You can always resume the plan in the next. The most important thing is to find a budgeting method that works for you and your goals.”