50-30-20 budgeting rule (households on under 70k)

[Chocoswirl]

Apparently a good rule of thumb is to spend 50% of monthly pay on needs, 30% on wants and 20% on savings.

If your household income is £70k or less per annum (roughly 2x average salary) are you managing to meet this ratio at the moment?
I’m finding it hard and calculating needs (mortgage, bills, food etc) as 60%-70% depending on how frugally I define needs.

Obviously we’re in a cost of living crisis, so I’m wondering if this is just par for the course, or maybe I need to be budgeting better.

No

I am but I know plenty who aren’t.

One family member is just getting further and further in debt as their basic outgoings are more than their income now. They will get out of this situation soon when they can end their tenancy but the COL crisis has battered them.

Our mortgage, bills, insurance, car and groceries comes to about 75% of our net income.

No.

I spend more than 50% on needs. If I use net pay minus council tax as the starting point (which is true net pay) it's way more than 50%.

It really depends.

If your housing costs are high because you live in an expensive area it's probably going to be hard to stick to. Alternatively, if you're mortgage free, you'll do it easily.

Plus what is 'essential'?

You could probably buy a week's worth of groceries for a family of 4 for £100 pw and you'd have a reasonably healthy, varied diet and wouldn't starve. But people may spend a lot more than that if they buy a lot more expensive food like ready prepared food, prime meat or fish, organic, out of season/imported produce etc.

Is your mobile phone a standard Android with a SIM only service or do you get the latest iphone every 2 years so pay £50+ pm?

Do you drive a basic car bought out of savings, or do you have a new one on PCP?

People may look at those things as necessary, but it's clear that the more expensive choices have a significant 'wants' component.

I'd say I operate on a "the little that doesn't go on needs goes into savings and sod the wants" basis. I'm single and I really can't afford 'wants' unless they're very occasional.

It's pretty depressing but hey ho, life in the UK in 2023.

I'm probably not far away. There is a want/need boundary which is the car, and I'd say if this was a need i'm over but if it's a want then I can be bob on, but sometimes the savings go towards the wants (still try to keep 3 months stashed away, but i'd happily not save much one month to go away for example which is not every month!). We have less than £80k left on a mortgage though (probably 25% LTV) which does make a difference vs someone mortgaged up to the hilt who I can imagine will have much higher housing costs.

My "needs" sit at 70% so, no.

Yes, we're probably around that.

Very rough calculation puts bills etc plus food shopping at around 52% savings at 30%, the remaining 18% must be on "wants". We are not extravagant but I would guess this will be things like kids activities, presents for kids birthday parties etc. we don't drink or go on nights out very often these days and run a fairly old / cheap car.

We have a relatively frugal lifestyle but do desperately need a larger house so are trying to save towards that.

Feel very, very lucky to be able to afford what we need, even if not exactly rolling in it.

It depends what you call 'needs'.

In the last couple of months I've had to buy a new car seat as my youngest outgrew theirs, and also for a repair on the car (from no fault of my own). Technically I can go without my car as I don't use it for work, so maybe these costs were more of a 'want'.

Thinking about it though, I'm probably spending more like 60-70% on food and bills, at least in those months when big unexpected bills don't come up.

We're not saving anything at the moment but we're meeting all of our needs and some of our wants. I've switched to Aveeno rather than Kiehl's and our holidays have all been wet weeks in Wales rather than abroad for years, but we have a nice house and eat nice fresh food and lots of people have it much, much worse.

The 50-30-20 budgeting suggestion is out of date imo. Our household income is over 80k before tax/student loans, we live in a very modest house and have no children, our basic bills are 75% of our income. Our car and phones are owned outright and we have no debt, that 75% is just basic living costs.

No. We're almost mortgage free, so are putting a higher percentage into savings as retirement is close by and more money will be needed then. Twenty seven years of parenthood has been a financial roller-coaster.

Yes.
But we live up north, so no ridiculous mortgage, and are past childcare.

It's a good rule. Going to try and work to it.

We are about 40% needs and 60% wants. 0 savings.

Some of DPs non-negotiables are pretty expensive. Fancy private dentist, 2 gym memberships and Bupa for all the family. We'd be a lot better off if we got rid of these.

We're on considerably more than £70k a year between us, and are only just inside the 50% on needs! Everything is so expensive now.

Thanks everyone, it’s reassuring to know most others seem to be in the 60-75% ball-park for needs as well.

Defining needs is tricky, my most conservative calculation is for bills (incl council tax), mortgage, food and petrol.

But when I expand it to include a modest budget for clothing, gifts and household bits and pieces (e.g. I bought a new hairdryer and a food processor this month, last month it was an extra wheelie bin, there always seems to be something new we need) then that brings it closer to 70%.

I usually spend on the needs and then save most of the rest, but with Christmas around the corner I find I’ve saved nothing this month and feeling a bit irresponsible, even though nothing I’ve bought seems outrageous. Life really has got so much more expensive.

Hahaha no.

My rent is roughly 50% of my income. Then I still need to pay all my other bills.

This is exactly why I always find the percentage thing totally stupid and tone deaf.

Surely needs cost as much as they cost?? It's not usually a negotiable expense.

Clearly breaks down if you’re on minimum wage, when needs will eat up your whole salary.

I find it helpful to divide my spending into “fixed” (poll tax, mortgage, house insurance, dentist etc), “adjustable” (food, fuel, clothing and other things where I could possibly save money) and “discretionary” (tv licence, holidays, meals out which if necessary I could cut out altogether).

I've just done a bit of maths - we're probably saving around 10/15% in an average month.

Needs vs. wants is tricky - some are obvious like bills/supermarket shops but things like like kids swimming lessons are a bit of both.

It's definitely over 50% on rent/bills/food though.