How to save money from your salary using the 50/30/20 method

Whether you’ve recently secured a new job, received a raise, or have a specific savings target, you might be wondering how much of your salary you should be saving. There’s no right or wrong answer when it comes to personal finance, but what matters is having goals and a plan that reflect your own situation. If you’d like to start saving money from your salary, this page explores some common methods.

There’s no fixed amount that will suit everyone. A first step is to consider how much take-home pay (or net income) you have to work with. Net income is what appears in your bank account each month once income tax, national insurance, student loan repayments, pension contributions, and any other deductions have been accounted for. Tax codes vary for each person, so two people with the same salary could have very different net incomes.

There are several rules of thumb for budgeting your salary. Experts often talk about the 50/30/20 rule, but what does this look like in practice, and how much of your salary should you save?

By following the 50/30/20 rule, you aim to put 50% of your monthly salary towards needs, or necessary expenses, 30% towards wants, or fun activities, and the remaining 20% towards savings or debt repayments.

So, how much should you save a month using the 50/30/20 budget rule? If, for example, you have a net income of £2,400 per month, you would allocate £1,200 to needs, £720 to wants, and £480 to savings or debt repayment each month.

These are the essentials. Think about the core outgoings that keep your household running:

• Rent or mortgage
• Council tax
• Utilities
• Groceries
• Transport
• House or car insurance
• Minimum debt repayments

Wants cover your discretionary spending, i.e. things you enjoy that improve your lifestyle but aren’t absolutely necessary:

• Eating out
• Takeaways
• Holidays
• Hobbies
• Streaming subscriptions
• Optional shopping
• Gym memberships

This portion is for building financial stability into your budget:

• Creating an emergency fund
• Making pension contributions
• Putting money into savings accounts
• Investing
• Paying off high-interest debt

Everyone’s situation is different, and those living in an expensive city or on a tight budget might need to allocate a larger portion of their pay cheque to  rent, mortgages and bills. And with research from Raisin showing that the average person in Britain is around £1,230 in debt, saving extra money may feel like an unrealistic goal. Given this and the cost of living in the UK, a standard budgeting rule may not fit every scenario. 

So, how much of your salary should you save if you’re on a low income, have debts or use more money to cover the essentials? Other budgeting methods include the 70/20/10 rule, where 70% of what you earn goes towards wants and needs, 20% for savings and investments, and 10% for debt repayment or donations. Some people allocate smaller percentages toward savings, for instance 5 or 10% of monthly income.

If you’re finding it difficult to reach your savings goal, a common approach is to either increase income or reduce spending. 

Here are some ideas to make saving from your salary easier:

1. Break down your payslip by adding up your take-home pay or, if earnings are variable, averaging your income from the past three months.
2. Track your expenses. Look at your bills, bank statements, and receipts for the last few months to see where your money is going.
3. Create a budget using the information from steps one and two. You can use Raisin UK’s free downloadable budget planner to break down your spending into different categories. 
4. Pay off existing debt. Note down whether you have any debts accumulating interest each month. Then use any extra income to pay debts down.
5. Spot where you can save on the expenses from your budget. For example, you could take advantage of supermarket loyalty schemes or new customer offers on household bills. 
6. Avoid impulse spending by pausing and waiting a week. You might realise you don’t need the item as much as you thought.
7. Pay yourself first by automating your savings each payday. With Raisin UK’s Automated Savings Plan, you can set up a standing order to have your chosen amount transferred into an easy access savings account to earn a competitive interest rate.
8. Reduce your energy consumption. Many people in the UK now take energy-saving measures such as turning off the lights when leaving a room, air-drying clothes instead of using tumble dryers, or using smart meters to track their energy consumption. You can find other ideas in our guide on how to save money.
9. Increasing your income. If you have spare time and a skill you enjoy, you could boost your income by offering services like dog walking, baking, DIY work, or taking on part-time or weekend jobs.

When deciding how to save money from your salary, you need to work out where to put those savings. In the UK, savings accounts vary widely in terms of interest rates offered and whether you can withdraw your money easily. Some people opt for online savings accounts, because they’re simple to manage on the go and there is often a lot of choice. 

When comparing savings accounts, it can help to ask:

• Does this account have any restrictions that won’t work for me? 
• Does the account allow me to top up whenever and however I want? 
• Will the interest rate on this account help me reach my savings goals?

Some of the most common types of savings accounts in the UK include:

• Fixed rate bonds: These accounts let you lock away a lump sum of money for a set period of time to earn a competitive rate of interest. 
• Easy access savings accounts, which offer more flexibility, allowing you to access your savings whenever you like. However, they tend to offer lower rates of interest. 
• Notice accounts: These accounts are a middle ground between fixed rate bonds and easy access accounts. They allow you a degree of flexibility to access your savings following a notice period, typically between 30 and 120 days. They can also provide competitive rates of interest.

For a comparison of savings accounts, explore the Raisin UK marketplace. All our partner banks offer protection under the Financial Services Compensation Scheme (FSCS). Eligible deposits with UK-regulated banks are protected up to £120,000 per person, per bank.

Simply register for a Raisin UK Account, log in, and apply for a savings account that aligns with your salary-saving goals. It’s free to open an account and registration only takes a few minutes.