Can You *Really* Afford It? Use the 50/30/20 Rule (Free Editable Template)

The 50/30/20 Rule is a great guideline for people who just started budgeting. From it, you can easily see if you have an income problem, a spending problem, or both.

How the 50/30/20 Rule works

Under the 50/30/20 Rule, you are dividing your salary or income into just 3 categories:

• 50% for Needs
• 30% for Wants
• 20% for Savings/Investments

Let’s break down each of them:

50% for Needs

The ‘Needs’ category is for necessities – things you HAVE to pay for. Some examples include:

• Accommodation – Mortgage or Rent
• Transportation – A travel pass or vehicle (and all its related costs)
• Food – Groceries and budget meals
• Bills – Electric, Water, Phone, etc
• Debt repayment – credit card, personal loan, BNPL
• Insurance/Medication
• Contribution to Family

Some people are in the unfortunate situation where their Needs-related expenses alone amount to almost 100% of their salary or income, and maybe even more. So they have to finance their lifestyle with debt, or do without Wants or Savings.

This is obviously not an ideal situation. The only way to get out of it is to:

• Earn more (via increasing salary and/or side income)
• Spend less on Accommodation, Transportation and Food
• For good measure, compare your expenses to Belanjawanku so you know which areas you can trim

30% for Wants

Wants is everything else that’s for leisure and fun.

Note: it’s completely okay to have fun! Sometimes personal finance people make it sound like you shouldn’t pay for these at all. We are human after all, of course we like to be entertained and socialise. A budget without fun expenses or restrictive budgeting is a bad budget – you’re more likely to ‘fall off the wagon’.

However, it is true that many people go overboard (thanks to, among other things, sophisticated marketing and advertising). Also, you have to be very careful because we live in consumerism culture. It’s easy to default to consuming and shopping when we’re bored or happy or sad.

(This is why I make my own Free/Cheap Things I Do to Stop Online Shopping Habit list. I think everyone should do their own list of free/cheap things they enjoy doing. Then when you’re bored, you can just refer to the list instead of mindlessly go to Shopee or go shopping.)

Basically what I’m trying to say is, you can spend however much you want on Wants… as long as it fits the 30% guideline.

20% for Savings/Investments

And last but not least, the final 20% is for Savings and Investments.

For some people, 20% is too much. For others, 20% is not enough. Then, adjust. The 50/30/20 Rule is just a guideline. If you want to make it 30% Needs 20 Wants 50% Savings and Investments also can. Up to you.

I do have to say though, saving RM100 a month is better than nothing, but you want to aim to save RM500 and above per month. Life is expensive and I’m sure you have big goals to achieve, whether that is marriage, a family, a house, travel or everything else.

As for where to put the savings, you can refer to this article: 6 Best Savings Accounts in Malaysia to Put Your Emergency Funds

The 50/30/20 Rule FREE Editable Template

As mentioned in the title, I made a free 50/30/20 Rule editable template. Consider this your 50/30/20 calculator – just enter your own numbers and it’ll spit out:

• How much is your allocation under Needs, Wants and Savings/Investment, and
• With your amount of savings, how much time you need to achieve your financial goals.

Find the template here (works best on desktop). Do not edit it directly – copy it into your GDrive and edit from there.

Here’s how it works:

1. Enter your salary/income and expenses in Needs and Wants Category

2. Find out how much you’re saving each month and how long it’ll take to complete your financial goals.

Note: I added some basic financial goals that’s applicable for most people. Feel free to edit.

Again, you can find the template here (works best on desktop). Do not edit it directly – copy it into your GDrive and edit from there. Do not request edit access plsss

If you’re not sure how to use it, refer to this video I made 🙂

Go ahead and try it out

Hope my 50/30/20 Budget Template helps you in your financial journey. Would appreciate you sharing this article with your friends – go ahead, spam this in your Whatsapp group. In this economy, most people are in the same boat, even though they don’t say it.

Next, want to learn how to calculate your net worth? Go ahead to How to Calculate Your Net Worth (Free Editable Template), there’s a free editable template there too 🙂