Step 1: Start with what you take home
Budget with your pay after Income Tax, National Insurance, pension and student loan, not your salary. Your payslip shows it, and the salary calculator works it out for any salary.
- Salary
- £2,916.67
- Income Tax
- −£344.67
- National Insurance
- −£149.53
- Pension (5%)
- −£145.83
- Take-home pay
- £2,276.64
| Part | Amount |
|---|---|
| Needs (50%) | £1,138.32 |
| Wants (30%) | £682.99 |
| Saving and extra debt payments (20%) | £455.33 |
| Take-home pay | £2,276.64 |
Budget with what reaches your bank account, not your salary: the split is worked out on take-home pay.
If you’re self-employed, nothing is taken off at source, so set aside part of every payment for your tax bill first: see Self Assessment and payments on account.
Step 2: See where your money goes
Look back at two or three months of bank and card statements. Most banking apps sort spending into categories. Don’t judge it yet: just find out what you really spend on rent, food, travel, subscriptions and eating out.
Then list the bills that don’t come every month: car tax and insurance, the MOT, your TV licence if you pay it yearly, home insurance, Christmas and birthdays. Add them up, divide by 12 and treat that as a monthly bill.
Step 3: Split it 50/30/20
| Share | For | Examples |
|---|---|---|
| 50% | Needs: what you must pay | Rent or mortgage, Council Tax, energy, water, food, travel to work, minimum debt payments |
| 30% | Wants: what makes life enjoyable | Eating out, streaming, holidays, hobbies |
| 20% | Saving and paying off debt faster | Emergency fund, ISA, extra pension, extra card payments |
On a £35,000 salary with a 5% pension, take-home pay is about £2,277 a month: about £1,138 for needs, £683 for wants and £455 for saving and extra debt payments.
If the numbers don’t fit
In London and other expensive areas, rent alone can take half your pay. Treat 50/30/20 as a guide, not a test:
- Cut wants first. They’re the easiest to change, and subscriptions add up.
- Check your bills: switching energy tariff, broadband or mobile deal often saves hundreds a year. If you get Universal Credit or some other benefits, ask your provider about cheaper social tariffs for broadband and phone.
- Check your Council Tax: if you live alone you should get a 25% single person discount, and you can ask to pay over 12 months instead of 10.
- Check what you can claim. The free GOV.UK benefits calculators show if you could get Universal Credit or other help: see benefits you might be missing.
- Save something, even 5%. The habit matters more than the amount at first.
Make it automatic
- Set a standing order to savings for the day after payday, or use the savings pots in your banking app.
- Pay bills by Direct Debit so you’re never late. If you have a credit card, set a Direct Debit to pay it in full.
- Give yourself a set amount for spending, and check in once a month.
Budgeting as a couple
Many couples pay their share of the bills into a joint account and keep their own accounts for personal spending. Agree what counts as a shared cost, and split it in proportion to what you each earn if your pay is very different. Remember a joint account links your credit files: see credit scores explained.
Try your own numbers in the budget calculator, which shows the 50/30/20 split next to what you really spend. If you’re struggling to cover essentials, get free advice early: see help with debt.