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The rule of three: Budgeting with 50/30/20

In today’s economy, managing personal finances can feel overwhelming. With rising living costs, fluctuating prices, and responsibilities at every stage of life—whether young professional, parent, or business owner—Filipinos are constantly seeking practical ways to make every peso count. Fortunately, one simple and proven guide continues to offer clarity: the 50/30/20 rule.

Popularized by U.S. Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their book All Your Worth: The Ultimate Lifetime Money Plan, the 50/30/20 rule provides a structured yet flexible approach to spending wisely and saving consistently. It is one of the easiest ways for Filipinos to create a balanced budget that covers necessities, makes life enjoyable, and secures the future.

Understanding the 50/30/20 rule

At its core, the rule divides your monthly after-tax income or take-home pay into three key categories: needs (50%), wants (30%), and savings (20%). 

50% for needs

Half of your income should go toward essentials—the expenses you cannot live without.  These typically include:

  • Rent or home loan payments
  • Utilities such as electricity, water, internet, and phone
  • Groceries and basic household supplies
  • Transportation costs like fuel, commuting, or car payments
  • Healthcare and insurance premiums

If your total expenses in this category exceed 50% of your income, look for ways to reduce your fixed costs, such as downgrading your data plan or finding a cheaper rental.  Consider these Money-Saving Tips for Moms.

30% for wants

This portion is for “non-essentials”—things you could live without but they make life enjoyable, such as:

  • Eating out and ordering delivery
  • Entertainment and leisure, including movies, streaming subscriptions, and hobbies
  • Shopping for clothes and gadgets
  • Vacations and weekend getaways

The 30% allocation encourages balance. You are not depriving yourself but rather practicing intentional spending. But if your needs really exceed 50% of your income, then cut back on discretionary spending. 

20% for savings and debt repayment

The final 20% of your income is dedicated to your future—financial security cushion. While it’s listed last, this portion should actually be funded first. Think of it as a non-negotiable expense. So, as soon as you get you paycheck, set aside 20% for:

  • Emergency fund - build up three to six months of living expenses in an accessible savings account
  • Investments - time deposits, UITFs, stocks, bonds for medium to long-term goals
  • Retirement - Many experts recommend saving between 10% and 15% of your annual income for retirement
  • Aggressive debt repayment - If you have high interest debt like credit cards and personal loans, you may need to allocate a larger portion of this 20% to quickly pay them off to save on interest costs.

For everyday banking, a savings account offers convenience and accessibility.  It’s best to have a separate account from your payroll account to make it easy to set aside and track your funds for short-term needs and emergencies. For convenience and consistency, set-up an automatic fund transfer from your payroll account to your savings account every payday though a mobile app.

You can easily schedule a fund transfer transaction to a future date and make it recurring.

And as you save for today, it’s crucial to invest for tomorrow. Investments offer higher returns than regular savings for longer-term goals like your children's college tuition, a house down payment, and retirement.  Ready to take charge of our financial future?  Read How to Avoid Common Investment Mistakes.

Making the 50/30/20 rule work for you

The 50/30/20 rule is a guideline, not a rigid formula. You can personalize your budget in a way that covers your needs, allows for meaningful spending, and prioritizes financial growth—regardless of the exact percentages.

  • If income is low: You might find that most of your income goes to essentials. That’s okay! Start with a 70/20/10 split and strive to get that 10% for savings first.  As your income increases, slowly shift the ratio toward the ideal 50/30/20.
  • If income is high: You can supercharge goals like early retirement, building a substantial emergency fund, or making a large investment while addressing basic needs and enjoying some luxuries. Go for a 50/20/30 or a 40/30/30 split.
  • When you have family obligations: Many Filipinos manage shared household expenses or support parents/siblings. Treat these regular, essential support costs as part of your 50% needs to ensure they are budgeted for accurately.
  • When needs change: If you are saving up for a house down payment or a major life event like getting married or starting a family, you might temporarily use a 50/10/40 split, where the extra 20% goes directly to savings acceleration or debt reduction. Once the goal is achieved, you can increase your wants allocation to 30% to reward yourself for working hard.

Common budgeting challenges and how to overcome them

Maintaining consistent budgeting habits is difficult but not impossible. Here are the usual concerns and practical solutions to make it easier.

  • “I find it hard to track everything.”
    Use debit cards, QR payments, and credit cards to simplify budgeting.  These financial tools make it convenient to track, categorize, and control your spending. With digital payments, each transaction is immediately recorded electronically, enabling you to see exactly where your money is going at any moment so you stay aware of your spending patterns.
  • “I cannot save consistently."
    Treat savings like a fixed bill that must be paid each month. Set up an automatic funds transfer on a mobile app. Automating the process removes the temptation to spend your savings.
  • “Unexpected expenses ruin my budget.”
    Life is full of surprises, so preparation is key. Build an emergency fund worth at least three months of living expenses. Keep this in a separate savings account that is easy to access but not linked to your everyday spending. Learn more from this article: Five Easy Steps to Build Your Emergency Fund.
  • “I feel deprived when I stick to a budget."
    A common budgeting mistake is cutting out all the "fun," which leads to burnout. Instead, identify what brings you real joy versus temporary satisfaction. Spending on a coffee out of boredom is different from spending on a meaningful experience, like a concert with a friend. Budgeting works best when it feels sustainable, not punishing.
  • “I’m not earning enough”
    A "scarcity mindset" fuels anxiety about not having enough. Counter this by focusing on what you do have. Practice gratitude for the roof over your head and the things you can afford. This can shift your perspective from feeling limited to feeling grateful and in control.

Start small, stay consistent

Financial success does not happen overnight. It is built day by day, peso by peso. Even if you cannot follow the 50/30/20 breakdown perfectly, what matters is starting somewhere and building the habit of budgeting.

The 50/30/20 rule is more than just a budgeting strategy. It is a mindset shift. It teaches you to be intentional with your money, focus on what truly matters, and prepare for whatever life brings.