The cost-of-living crisis has highlighted the importance of budgeting and financial planning.  

A 50/30/20 budget is a simple way of making a plan for your income and allocating your spend. 

There are three clear and distinctive categories – 50% for needs, 30% for wants and 20% to put aside as savings. 

For example, if £2,000 comes into your account each month, £1,000 would go towards your ‘needs’ – rent, council tax, energy, food and transport to work.  

£600 is to spend on what you want, including leisure and £400 is there to pay down credit card debt, or set aside for a rainy-day fund. 

Once you decide what is essential spend and what is non-essential, you’ll know if the 50/30/20 budget can work for you. 

Many digital banks allow you to create individual spaces that are instantly topped up when your income arrives.  

They can also accommodate additional pots if required so that, for example, you can keep an eye on what you spend on coffee or takeaways. 

Ultimately, there’s no one-size-fits-all approach, but budgeting is a good discipline, and as your savings grow, you may start to invest on your way to financial independence.
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