The 50/30/20 rule explained

Happy new Year!

We are now in a new year, that does not mean you automatically start over alongside the calendar. Our finances are exactly where we left them. Same goes for everything in our lives.

The new year comes with a lot of expectations and commitment. I understand that our personal finance is probably not yet balanced, for you it might even be all over the place.

So, if money has ever finished before the month, you are not alone. For many of us in our different households, income comes in, bills escorts it out. It is not always a problem of earnings; often, it is a problem of structure.

Balance is needed for our finance to function, this is where the 50/30/20 rule comes in. It does not promise instant wealth or ignore the realities of rising costs. What it offers is direction, exactly what you and I need this year to steer the deep waters of uncertainty. The rule simply says: divide your take-home income so 50% goes to needs, 30% to wants, and 20% to savings or debt repayment. I know it sounds simple on paper, together we make it practical and adapt it to real life.

50% for Needs: The Non-Negotiables

Needs are expenses you cannot avoid. For you it could include rent, food, transport, utilities, school fees, essential healthcare, and minimum debt repayments. In our various homes, this category often feels heavy — and for good reason.

For example, if your monthly take-home income is ₦200,000, about ₦100,000 should cover these basics. That may mean ₦40,000 for rent, ₦25,000 for food, ₦15,000 for transport, ₦10,000 for utilities, and ₦10,000 for school or medical costs.

This is the area you would need to make sure your cloth is properly cut according to the amount of material you have. You cannot earn ₦200,000 and be paying rent on the Island for ₦2million. That is not considered wise. Find something that fits the material you have. ₦40,000 monthly for 12 months would mean ₦480,000, get something close to this figure so as not to become without funds after paying rent. If your essentials exceed 50%, the rule is not broken — it just needs adjustment. High rent, rising food prices, and transport costs are realities. What matters is knowing your numbers and making conscious trade-offs, not pretending expenses do not exist.

30% for Wants: Enjoyment with Boundaries

Wants are what make life enjoyable, but they are not essential for survival. They include social outings, data subscriptions, clothing, ps5, eating out, salon visits, and impulse purchases. Using the same ₦200,000 example, ₦60,000 falls into this category. This is where celebrations, owambe, felabration, birthdays, and Detty December spending belong.

The problem is not enjoyment — it is unplanned enjoyment. When fun has no budget, it spills into rent money and savings. When it has limits, you can enjoy life without financial regret. 20% for Savings and Debt: Paying Your Future Self

This is the most neglected part of many of our budgets — and the most important. Savings and debt repayment include emergency funds, investments, retirement planning, education funds, and clearing high-interest loans. From ₦200,000, ₦40,000 goes here. Even if you cannot start with the full 20%, start somewhere. Consistency matters more than size.

Automating savings helps. When money leaves your account before you see it, spending becomes intentional instead of emotional.

Making the Rule Work in Nigeria

The key to using the 50/30/20 rule in our country is flexibility:

Budget with net income, not gross pay. For freelancers and business owners, use an average of the last 3–6 months as your baseline.

Separate accounts or wallets help reduce temptation.

Plan for family obligations — weddings, contributions, giving, Tithes, offering — they are not surprises.

Prioritise clearing high-interest debt while maintaining a small emergency buffer.

If your needs are higher than 50%, consider a 60/20/20 split temporarily. If debt is the priority, a 50/20/30 approach may work. This rule is a guide, not a punishment.

Your money should work for you — not surprise you at the end of the month.

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