The 50/30/20 saving rule

We'll tell you everything you need to know about this method based on percentages, so you won't have to deprive yourself of anything while still saving every month

The 50/30/20 saving rule consists of taking your monthly income and dividing it into percentages such that all your primary needs are covered (50%), you can allow yourself some treats (30%) and, on top of that, you save for the future (20%).

This is a widely used method that is becoming increasingly widespread and accepted among those who not only want to save for the future, but also to monitor what they spend each month without the accounting becoming too torturous. This is the case because one of the basic principles of finances is to deduct your expenses from your income, to give you your savings. In other words: expenses - income = savings. With the 50/30/20 saving law, the order of the terms changes such that the savings are deducted from the income, giving the following mathematical equation: income - savings = expenses. As trivial as it may seem, this means that from the very beginning you take into account the percentage of saving that must be met every month. This way, that amount of money will be deducted from the start, leading you to spend less month on month and accumulate more money for the future.

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50% to cover basic needs

When controlling your expenses and savings, it is crucial to never allocate more than 50% of your monthly income to cover your basic needs. Despite being the largest budget item of this saving rule, to some people it may not seem enough to live their everyday life. But this happens, above all, when a person is not completely clear about what is an essential item and what is dispensable.

50% of your salary should be spent on:

  • Paying your mortgage or rent.
  • A household's recurring expenses, such as electricity, water, apartment block service charges, garbage collection, etc.
  • Food for the month.
  • Paying school fees if you are studying or have children that do.
  • Footwear and clothing.
  • Transportation to work.

All these expenses have one thing in common: they are vital for our day to day lives.

20% for savings

This part of the rule is probably the most painful, since as soon as we apply it we see our money reduced by 20%. To alleviate the sensation of losing purchasing power, it is important to do two things month on month. The first thing is to deduct the percentage for saving as soon as we receive our monthly salary. This way, from the first day of the month, if we get paid, for example, €1,000, we will have €800 to organize ourselves rather than the total amount.

The second thing you need to do to view the monthly “loss” of money in a positive light is that, as soon as you deduct the 20% from your salary, you deposit the money corresponding to that percentage in a separate account from our usual checking account. For example, in a savings account with a good interest rate. This way, we will see the balance of that account grow month on month with the money deposited plus the interest payments, which will make it easier for us to separate at the beginning of the month that 20% necessary for future expenses.

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30% for dispensable expenses

The last group of the 50/20/30 rule is, in all certainty, the one that we are going to enjoy complying with the most. It consists of allocating 30% of our monthly income to those day-to-day or one-off expenses that are dispensable, but which significantly increase our quality of life. This category includes all leisure activities such as going to the movies, going out for dinner sometimes or going on vacation.

Control all your expenses and save better with BBVA

If you are prepared to save but you don't know how to manage all the accounts alone, you are in luck. To this end, BBVA offers you BBVA Bconomy, a new tool that will help you to control all your expenses from your cell phone.

With this new service by BBVA, you will have information about your finances that you were always missing. You will be able to analyze your expenses in detail and discover how to reduce them and adjust them to the 50/30/20 rule. 

In addition, in the BBVA app you will find several features for controlling your finances efficiently. For example, it has a chatbot, a smart assistant that you can interact with if you wish to get answers to any question or if you need financial information, which is displayed in a simple format. Our users, especially the elderly, say that they find it really useful, and note in particular its pleasant and personal approach. Start today to enjoy the benefits of having all your expenses under control. Because the more you know, the better decisions you can make and the more you save.

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