An in-depth analysis of 40 Over: the budgeting rule that actually works in the UK?
Luke, co-founder of Financial Interest, has taught tens of thousands of people about making money. Now he's focused on how we can make money work for us.
Last updated 30th September 2026
15 min read
In this week's newsletter we introduced 40 Over, an alternative to the 50/30/20 rule for budgeting in the UK.
This analysis looks at why it works, how it stacks up against other popular budgeting rules and alternatives we devised, and what happens when we stress test the figures.
We're sharing everything publicly so smarter people than us can tear it apart – or praise us unconditionally. Your choice, smart people.
TL;DR
- 40 Over has the potential to work for 93% of UK working-age households, covering their essentials, saving enough to secure their future, and leaving money for fun. The 50/30/20 rule only works for 24%
- We couldn't find a household in any of our modelled scenarios that 50/30/20 works for but 40 Over doesn't
- 40 Over holds up when savings returns are poor and after 20 years without adjusting the numbers
- It's weakest in expensive areas, for large low-income families, and for people who start saving late. Even so, it beats 50/30/20, 15/65/20, and 40/30/30 in every one of those situations.
The 40 Over calculator
After tax, NI, student loan and other deductions.
Yours and employers' combined.
Save from take-home
£0
Fun
£0
15% of your total income
Essentials limit
£0
Spend less if you can
How 40 Over works
- Work out your total income. Your household's yearly take-home pay after tax, National Insurance, student loans and other deductions, plus everything going into your pension – yours and your employer's contributions.
- Your savings target. Take £12,548 off your total income for each adult in the household, then save 40% of what's left. Your pension contributions count towards this, too.
- Your fun budget. 15% of your total income.
- Your essentials limit. Whatever's left of your total income once those two are accounted for.*
- Divide everything by 12 for your monthly figures.
*For high earners, ensure your essentials limit is no more than three State Pensions (£37,644) per adult, plus 20% of your total income above that, per year. Split anything over that figure between saving and fun.
How we judged it
We modelled 135 households – nine types, from a single person to a couple with three children, at 15 income levels between £20,000 and £1 million – and ran each one through 2026/27 tax, National Insurance, workplace pensions and Child Benefit rates. Then, we weighted everything to match the UK's working-age households, and ran four different tests:
The four tests
- Essentials: a household fails if the rule doesn't leave enough to cover what essentials typically cost for that household and income
- Savings: a household fails if the rule has them saving less than they'd need to keep up their current standard of living in later life, alongside the State Pension
- Not over-saving: a household fails if they are saving far more than they need to, whilst leaving less than a fifth of their take-home pay spare
- Fun: a household fails if the rule leaves less than 15% of their take-home pay for things they enjoy.
When we say a rule works for a household, we mean a household could follow it and pass all four of these tests at once. It doesn't mean they already live that way – most would need to save more and spend a bit less on wants to get there.
Every rule was then also put through four different scenarios:
- An average cost area
- An expensive area where essentials are 20% dearer
- A cheap area where essentials are 15% cheaper
- A scenario where people generate poor long-term savings returns
Worth noting: we didn't want to devise a model that simply fits how everyone already spends. We needed an approach that would nudge people in a sensible direction, help them save and spend more on things that matter, whilst giving everyone licence to spend without it leading to wildly unsustainable financial habits.
Why 40 Over works
40 Over gets three things right that flat percentage rules can't.
Firstly, it protects most of the money you need to live on.
Nobody is asked to save a penny until they've got a basic amount to cover a lot of the essentials. We tested a whole range of floors for that amount, and the one that worked best came out at almost exactly the State Pension – £12,548 per year – purely coincidence on our part, though perhaps intentional on the side of the government.
According to our initial analysis, it's also close to what the lowest-income fifth of households actually spend on essentials in their entirety – and because it goes up every April, the rule updates itself.
But we tested a whole load of other potential numbers too, across multiple different scenarios:
Share of UK households 40 Over works for, by savings floor
Secondly, it asks more of people who have more.
Because you save at least 40% of everything above the essential spending threshold, your savings rise as your income does. A flat 20% savings goal – as established by the 50/30/20 model – is too much for someone on £20,000 and nowhere near enough for someone on £200,000.
It also puts a brake on significant lifestyle creep for high earners, with an additional rule for essential expenses for high income households.
This rule – remembering it applies to something that is already a limit and not a budget – caps essential expenses at three State Pensions per adult, plus 20% of total income above that.
This means your essential expenses can still scale with income, but more money gets freed up for savings and a little more for fun.
What each rule tells you to save, against what's needed
Savings as a share of take-home pay plus pension. The shaded band is the savings needed to keep up your standard of living later on, from normal to poor savings returns.
You'll notice 40 Over asks for more than the shaded band in the chart above. That band is what you'd need purely for retirement. The savings target is deliberately higher, because most people are saving for more than one thing – an emergency fund, a deposit, a new car, a wedding – how you split it between those is up to you.
Finally, our method allows your essentials budget some room for your lifestyle.
Rent in Manchester doesn't equal that of rent in Camden, and a family of five doesn't eat like a single person. 40 Over sets your savings and fun first and gives essentials the rest (or a good amount of the rest if you're a very high earner).
How it compares
We tested 40 Over against the rules you're most likely to have come across – 50/30/20, 15/65/20 and 40/30/30 – plus three of our own attempts that looked like they might have some potential, which are included in the charts below and we'll explain later. And if you think that's confusing, trust us: there were many other attempts that never made it past the simulation stage.
Every household vs every rule, compared
Each square is one household. Filled squares are households the rule works for – hover over or tap a square to see why a rule falls over.
Household take-home pay plus pension contributions, per year
40 Over has the potential to work for a far greater percentage than any of the other approaches we looked at.
50/30/20 fails lower earners because essential spending in the UK takes more than half their income, then fails higher earners because 20% isn't enough to save – allowing for far too much lifestyle creep and an inability to retire with a similar standard of living.
40/30/30, which sets aside 40% for essentials, 30% for wants and 30% for savings, fails everyone below £70k on essentials. 15/65/20, which allocates 15% to savings, 65% to essentials and 20% to wants, suits some lower and middle earners, but under-saves from about £30k for singles and £70k for couples.
In cheap areas, 40 Over works for every household we modelled, whereas 50/30/20 manages only half.
Share of UK households each rule works for
Weighted to UK working-age households.
How each rule does across the income scale
Share of households each rule works for in each income decile, in an average-cost area.
What goes wrong, rule by rule
Share of UK working-age households, in an average-cost area.
Trying to break it
A rule that only works for tidy, average households isn't much use when families up and down the country look very different to the average, though – so we went looking for the big edge cases.
Big families
Most budgeting rules are built with a single person or a couple in mind – we decided to test families all the way up to ten children.
40 Over works for 87% of families with three children, against 9% for 50/30/20. It starts to struggle from five children (64%), but with ten children it still works for 31% – which is significantly better than 50/30/20, which works for none. In expensive areas, bigger families find it much harder – 36% of families with three children pass (0%, again, with 50/30/20).
Share of households each rule works for, by number of children
Couples with one or two earners, and single parents, at every income level.
Unusual situations
We also tried the kinds of households that tend to break budgeting rules.
Having no workplace pension barely matters – 40 Over still works for 91% of households, as it does for 89% when paying 15% of your income into one.
At incomes between £10,000 and £20,000, it works for a third of households, whereas 50/30/20 works for none.
London-level housing costs, where essentials are 35% above typical, break it for most people (7% pass), but they break 50/30/20 completely.
Share of households each rule works for,
in unusual situations
Starting late is our biggest blind spot. Our savings benchmark assumes a full working life of saving. With 20 years to go, 40 Over only works for 13% of people. Those people would need to save approximately 50% above the floor – at least, to maintain their standard of living in retirement. No simple split fixes this issue, although anyone who already has a pension pot is better off than these figures suggest.
Time
Budgeting rules tend to slowly stop working as prices rise. Anything built on a fixed pound figure gets stricter every year unless you remember to update it – and then the catchy name no longer fits.
Share of households each rule works for,
if left unchanged for 10 and 20 years
Assumes 3% inflation a year, with pay rising in line.
40 Over's weak point over time is different because we're using the State Pension as a proxy for the basic cost of living and the State Pension figure updates every year. However, this approach only works while essential costs and State Pension move together.
State Pension drift
Wouldn't you know it? We were finishing this analysis when Burnham dropped the bombshell that the triple lock will be replaced with a double lock from April 2030. So, we've re-run the numbers under the new policy, and what follows reflects it.
Until 2030, nothing changes. The triple lock still applies, so the State Pension rises each April by whichever is highest of inflation, earnings growth or 2.5%. In practice, that has meant it outpacing both: between 2010 and 2023 it rose 60%, against 42% for prices and 40% for earnings, according to the IFS.
From April 2030 the earnings element is out – the State Pension will rise by prices or 2.5%, whichever is higher, with the Government saying it will hold its value against earnings over the longer term rather than year to year.
For 40 Over, that's better news than it sounds. Our floor is meant to track the cost of living, and a double lock still guarantees the State Pension keeps pace with prices. What it drops is the guarantee that it keeps pace with pay, which matters less for a rule built around what (most of) a basic life costs.
The risk has flipped direction, though. Under the triple lock, the danger was the floor growing too generous and savings targets shrinking too far. Under the double lock, the risk is the floor slipping behind wages, squeezing what's left for essentials as incomes rise around it.
So, we ran it three ways. If the State Pension holds its value against earnings, as the Government intends, 40 Over still works for 93% of households in 30 years' time. If it slips 1% a year behind pay, that falls to 88%. At 1.5% a year behind, 76%.
All three still comfortably exceed what 50/30/20 manages today.
Share of households each rule works for,
as the State Pension drifts from living costs
40 Over is shown under the double lock announced for April 2030, with the triple lock until then. Other rules assume nobody updates them.
Expensive areas are the main sticking point. There, 40 Over works for 43% of households now. If the State Pension holds its value, that actually improves slightly to 47%. If it slips 1.5% a year behind pay, it drops to 13% over 30 years.
And there's a broader point to remember: 40 Over updates itself, but it isn't set and forget forever. If the State Pension and the cost of living pull do apart over a long enough period, the floor would need revisiting.
Alternative approaches that didn't make the cut
40 Over is our fourth and hopefully final attempt at a paradoxically simple-yet-detailed budgeting approach that actually works in the UK.
Here are the other things we considered:
1-for-150
- Work out your household score: 1 for you, 0.5 for a partner, 0.3 for each child.
- Divide your monthly take-home pay plus pension by that score.
- Save 1% for every £150 of the result, up to 40%.
- Spend 15% on fun. The rest is essentials.
The basic idea for this was sound – savings rise with income and bigger households are asked for less – but it lets families off too lightly. It doesn't apply to anyone below £1,000 a month per adult and only works for 48% of households when savings returns are poor. The £150 figure is also a fixed amount of money so someone would need to keep updating it due to inflation. Leave this rule for 20 years and it works for just 44% of households, down from 82% today.
1-for-125
- Household score: 1 for you, 0.5 for a partner, 0.1 for each child.
- Divide your monthly take-home pay plus pension by the score.
- Save 1% for every £125 of the result, up to 35%.
- Spend 15% on fun. The rest is essentials.
The best of the pounds-per-percent rules – 89% of households – but suffers from similar inflation-related issues, and works for even fewer people (23%) in 20 years' time. The savings cap also causes potential spending problems for very high earners.
40/40/20
Our first go at a State Pension floor split everything above it three ways: 40% saved, 40% for essentials, 20% for fun. The drawback was that fun was only budgeted above the floor, so those with lower incomes had very little money to live their life – a couple on £30k would get £82 per month to spend. This approach worked for just 22% of households.
Beyond these, we tested 78 other rules across eight different approaches – tax-band-style tiers, "pay yourself first", "cover your essentials, then split the rest", and more. None matched 40 Over on both normal and poor returns.
Where 40 Over fails
In expensive areas, where essentials cost 20% more, 40 Over works for just 43% of households. That's still miles ahead of 50/30/20 with a 3% pass rate, but plenty of renters and families in London and the South East will find the essentials limit tight.
1-for-150 actually fares better here today (57%) but isn't forward-looking, and it asks people to save less – which makes it fall flat on its face when returns are poor.
If you live somewhere expensive, there's a simple tweak to the calculations: work out your 15% fun budget from your take-home pay only, leaving out pension contributions. That gives you a little more leeway for your essentials and boosts 40 Over from 43% to 50% of households in expensive areas, without making it worse anywhere else.
40 Over also allows for a generous essentials limit – potentially encouraging lifestyle creep. The important part to remember is that it is a limit and not a budget when it comes to essential expenditure, and it's recommended to put more towards both savings and fun if you can.
The upside of that headroom is flexibility – 84% of households can follow 40 Over and still have at least 5% of their take-home pay left within their essentials limit to use for other goals, like a house deposit or a new car. For just over half of households, it's 10% or more.
Essentials limit against what households actually spend
A couple at each income decile, per month. The shaded area is headroom above typical essentials spending.
For the poorest tenth of households in the UK, no budgeting rule would be effective – because essential expenses already exceed total income. But at the low income bracket of £10,000-£20,000, 40 Over still manages to work for a third of households, where 50/30/20 works for none.
If you've got less than 20 years until retirement and have no retirement savings, you'd need to save more than 40 Over recommends – if you want to maintain your current standard of living.
London-level housing costs break the model for most households – just a 7% pass rate (against a 0% pass rate for 50/30/20).
With seven or more children it fails more often than not.
A 15% budget for fun is deliberately modest – most households spend around a quarter of their income on wants today, and if savings targets are met and essential costs are kept down, more budget for fun becomes available.
We are relying on the State Pension continuing to roughly track the minimum cost of living – an assumption that has broadly held so far, but isn't guaranteed.
Like any percentage-based rule, it can't tell a pricey rental from an oversized mortgage.
Bottom line
Nothing simple enough to fit on a post-it note is ever going to be perfect but across every scenario we could think of – within a limited and admittedly fast-paced timeframe – 40 Over has the potential to work for far more households than every other budgeting approach we looked at. It asks more of people who can afford it and less of people who can't and it keeps working as the numbers get old.
Its weak spots are real and worth knowing before you use it, but even at its weakest it still does better than most other budgeting methods. The only rules that beat it anywhere were our own discarded ideas: 1-for-150 in expensive areas and 1-for-125 for late starters and families with five or more children. Both of those fall apart within a decade or two unless you update the rates.
Methodology
For each household, we applied each rule outlined in this article and ran the four tests. There's no randomness involved. The same household, rule and scenario always give the same answer and across everything in this article, that's well over 100,000 checks.
Essential costs come from the ONS Family Spending data for the year to March 2025, uprated to 2026 prices by Financial Interest and adjusted for household size. They stop rising at the level of the highest-income tenth of households, so a bigger house on a bigger salary counts as a lifestyle choice rather than a need.
For saving enough, we assumed savings grow 4% a year above inflation over 35 years and 3% over 30 when returns are poor, and are drawn at 4% a year alongside the full State Pension. London-level housing assumes essentials cost 35% more than typical and the time tests assume 3% inflation with pay and living costs rising in line.
The ONS income data behind our UK-wide figures includes benefits such as Universal Credit but our modelled households treat all income as earnings. As a stress test, we treated all income below £40,000 as untaxed benefits instead. 40 Over moved from a 93% to a 91% pass rate and the rules ranked the same way.
Pass and failure rate figures are our estimates, not official statistics.
Two of our tests involved judgement calls, but neither changes how the rules rank. Tightening or loosening the over-saving test barely moves 40 Over's success rate (92%-93%). The fun test is tied to the rule itself – 40 Over sets fun at 15%, so if you think you need 20%, the rule would need to change to match.
