MaertinK.Why Many Don’t Use the 50/30/20 Rule and Why It Doesn’t Work for Everyone
Introduction
Budgeting is a crucial financial practice, yet many people struggle to create and stick to one. One of the most popular budgeting methods is the 50/30/20 rule, which suggests allocating 50% of income to necessities, 30% to wants, and 20% to savings or debt repayment. While this method works for some, many find it impractical and challenging to follow. This article explores why many people don’t use the 50/30/20 rule, why it doesn’t work for everyone, and the importance of budgeting—especially for low-income earners.
Why Many Don’t Use the 50/30/20 Budget Rule
Despite its simplicity, many people don’t use the 50/30/20 rule for various reasons:
1. Low Income and High Cost of Living
For most low-income earners, 50% of income isn’t enough to cover basic necessities such as rent, food, and transportation. In high-cost cities, essentials often take up 70-80% of income, leaving little for wants or savings.
2. Irregular or Unstable Income
Many people work in the gig economy, freelancing, or casual jobs where income fluctuates. In such cases, strict budget categories are hard to maintain, making it difficult to follow a fixed percentage rule.
3. High Debt Burden
Many individuals, especially those with student loans or personal debt, find that debt repayments alone take up more than 20% of their income, making the 50/30/20 allocation unrealistic.
4. Cultural and Family Obligations
In many African and developing countries, individuals often have extended family responsibilities, requiring them to support parents, siblings, and relatives. These obligations make it impossible to stick to the standard budget ratios.
5. Unexpected Expenses
Medical emergencies, car repairs, or sudden job loss can disrupt budgeting plans. When finances are tight, even small unexpected costs can cause people to abandon structured budgeting altogether.
Why Budgeting is Important, Even If 50/30/20 Doesn’t Work
While the 50/30/20 rule may not work for everyone, budgeting itself remains essential. Here’s why:
1. Helps Track and Control Spending
A budget allows you to see where your money goes, preventing unnecessary expenses and helping you focus on essential needs.
2. Reduces Financial Stress
Knowing how much you have for bills, savings, and leisure reduces anxiety about money and prevents financial surprises.
3. Encourages Saving and Investing
Even with a low income, small, consistent savings add up over time. Budgeting helps you prioritize setting aside money for future goals.
4. Avoids Debt and Late Payments
Without a budget, it’s easy to overspend and rely on loans. Budgeting helps ensure bills are paid on time, preventing debt accumulation.
5. Prepares You for Emergencies
A budget helps you build an emergency fund, which provides a financial cushion for unexpected expenses.
How to Start Budgeting as a Low-Income Earner
If the 50/30/20 rule doesn’t work for you, here are practical steps to create a realistic budget that fits your situation:
1. Track Your Expenses
Write down all your expenses for at least a month. Categorize them into necessities, optional expenses, and savings.
2. Prioritize Essentials
Ensure basic needs such as rent, food, and utilities are covered first. If necessary, cut down on discretionary spending.
3. Use a Flexible Budgeting Approach
Instead of rigid percentages, use a method like zero-based budgeting, where every shilling is allocated to a specific purpose.
4. Save What You Can
Even if it’s as little as 5% of your income, develop the habit of saving regularly. Consider using savings apps or mobile banking features.
5. Reduce Debt Gradually
If debt is a challenge, allocate a portion of your income to repayment, but don’t neglect essentials. Look for ways to consolidate or negotiate lower interest rates.
6. Use Budgeting Tools
Apps like M-Pesa Pochi, KCB Mobi, or personal finance spreadsheets can help automate and track your budget.
Conclusion
While the 50/30/20 rule provides a good foundation for budgeting, it doesn’t work for everyone—especially low-income earners. However, budgeting remains an essential financial practice for managing expenses, reducing debt, and building financial stability. The key is to find a method that works for your income level and lifestyle. Start small, be consistent, and adjust as your financial situation improves.
