How much should you spend and save?
Rose is editor at Financial Interest. With over 15 years of writing experience and a passion for personal finance, she focuses on making money less intimidating, more interesting, and occasionally even fun 🙌
Last updated 30th September 2026
17 min read
Around 2,400 years ago, the Greek writer Xenophon was telling anyone who would listen that wealth isn't what you own, but what you can make use of wisely.
More than two millennia later, Benjamin Franklin made a living dispensing the same sort of advice, later collected into a pamphlet called The Way to Wealth. His warning about little expenses – that a small leak will sink a great ship – has outlived almost everything else we remember about him.
Both men were essentially sharing the same timeless message: how you handle money matters more than how much you have.
Since then, many attempts have been made to simplify the process of handling money wisely, and one method in particular has garnered the affection of many a budgeteer and social media finfluencer.
Popularised by now US senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their 2005 book All Your Worth: The Ultimate Lifetime Money Plan, the 50/30/20 method advocates splitting your income into three buckets: 50% for needs, 30% for wants, and 20% for savings.
It’s exactly the sort of rule your bank loves to shout about, the framework of innumerable online calculators, and the subject of countless hours of YouTube content.
But there's a problem: our analysis suggests it isn't fit for purpose for over 60% of UK households.
So should this budgeting approach be left in 2005 with MySpace, low-rise jeans and Jamie Oliver's war on turkey twizzlers?
And if not 50/30/20, then what? How much should you be spending, how much should you be saving, and what's actually realistic in the UK today?
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How 50/30/20 works
The allure of the rule lies in its apparent simplicity and attainability; a strict system intended to guarantee you set aside enough for essentials, curb your wilder spending impulses, and make sure you set a decent chunk aside for a rainy day:
- 50% for needs: rent or mortgage, council tax, household bills, transportation costs, childcare, and anything else you need to live a no-frills life
- 30% for wants: the frills – going on holiday, new clothes, treats, or donating to charity
- 20% for savings or investments: perhaps in a savings account or cash ISA if you’re building an emergency budget, or in a tax-efficient investment account for long-term goals like retirement.
The chart below gives you a better idea of how the rule is intended to work across different levels of take-home pay – your wages that you keep after taxes and National Insurance.
Worth noting: 'take-home pay' figures should also include your pension contributions (even though they'll be subject to tax in future – that's a complicated discussion we'll save for another day) and these count towards savings.
What the 50/30/20 rule gives you at each level of take-home pay
If you need to calculate your take-home pay, try using our calculator.
But how much are people actually spending?
To find out if the 50/30/20 rule is viable, we need to get an idea of what people in the UK are doing with their money – and how much is spent on essentials.
One particularly helpful resource is the UK family spending data from the Office for National Statistics, which asks around 5,000 households a year to keep a detailed diary of everything they spend for a fortnight, along with some bigger and less frequent costs. Those households are weighted to represent all 28.7 million in the UK.
Here's what that spending looks like for the "average" UK household:
| Category | Spending per month | Spending per year | % of total spend |
|---|---|---|---|
| Housing, utilities and council tax | £1,012 | £12,148 | 31% |
| Discretionary and lifestyle | £992 | £11,904 | 30.4% |
| Transport | £453 | £5,432 | 13.9% |
| Food and household basics | £389 | £4,663 | 11.9% |
| Insurance and protection | £125 | £1,496 | 3.8% |
| Communication (phone, internet, etc) | £107 | £1,285 | 3.3% |
| Health and education | £96 | £1,146 | 2.9% |
| Gifts, charity, interest and subscriptions | £91 | £1,095 | 2.8% |
| Total | £3,264 | £39,169 | 100% |
Adjusted for inflation since the figures were published in 2025, average household spending comes in at £3,264 per month, or £39,169 annually.
Of course, the data can't tell us exactly what's essential to any one household, but removing discretionary spending as far as we're able – so, days out, holidays, treats, gifts, charity donations, etc – gives us a total of around £27,100, versus non-essential spending at £12,060.
That means spending on "needs" for the typical UK household takes up around 70% of the total.
But that's only half the picture, because households don't spend all the income they have. The average can also be misleading, because it blends together a household spending £1,300 a month and another spending £6,300, but describes neither.
Luckily, we can also estimate needs spending by income decile – from the lowest-income tenth of the country in decile one, to the highest in decile ten.
Which gives us a very different picture:
| Income decile | Needs spending per month | Disposable income per month | Needs as a % of income |
|---|---|---|---|
| 1 | £920 | £866 | 106% |
| 2 | £1,086 | £1,605 | 68% |
| 3 | £1,346 | £2,129 | 63% |
| 4 | £1,569 | £2,651 | 59% |
| 5 | £1,702 | £3,214 | 53% |
| 6 | £1,961 | £3,771 | 52% |
| 7 | £2,131 | £4,425 | 48% |
| 8 | £2,442 | £5,228 | 47% |
| 9 | £2,627 | £6,591 | 40% |
| 10 | £4,011 | £11,214 | 36% |
The lowest earning 10% of households spend more than their disposable income allows on needs alone, meaning they're effectively going into debt every month to stay afloat, without even accounting for spending on the stuff they enjoy.
Meanwhile, the highest income 10% of households spend only 36% on essentials, with over £7,000 left to comfortably cover everything else.
Put these results into a chart plotted against the 50% rule, and the pattern becomes easier to see:
Spending on needs as a percentage of take-home pay, by income decile
Only the top four deciles – the 40% of highest-earning households in the UK – manage to keep essential spending below half their income.
60%, or around 17 million households, spend more than half of what they have on essentials alone.
To get below the 50% line at all, a household needs a take-home pay of roughly £53,000 a year – well above the £42,000 a typical household has.
So the 50% target isn't just difficult to hit. For many, it's nowhere near reality.
Are we just bad at budgeting?
But this does raise a more interesting question: if most of us are spending more than half our income on essentials, are most of us just really bad at budgeting?
To answer that, it's helpful to look at how household spending and prices have changed in the past 25 years or so:
Household spending vs prices, 2001-2025
Both series indexed to 100 in 2001-02. Source: ONS, Family spending in the UK, financial year ending 2025. Spending is adjusted for inflation using ONS price data.
The blue line in the chart above shows the cost of the things households buy. The red line is how much households actually spend, with both anchored to a common starting point in 2001.
In an ideal world, those two lines would rise together, because as prices go up, wages tend to follow, and people spend more to keep buying the same things.
For the first few years our chart shows, that's exactly what happened. In fact, spending grew slightly faster than prices, which means households were covering rising costs and still able to afford a bit more on top.
But a gap opened up after the financial crisis in 2008. At that point, spending dropped below prices as incomes tanked and wage growth stagnated – and it stayed that way for the best part of a decade.
Spending briefly recovered in 2016-17, but not because wages had. In fact, adjusted for inflation, the average wage was lower in 2017 than it was a decade before.
What changed is that more people were in work, which pushed average household income back to pre-crisis levels, while people were also saving less, keeping spending up at the cost of building a buffer.
The pandemic opened up another huge gap beginning in 2020. After an initial spending drop while we were all cooped up indoors, inflation arrived, with energy and food bills surging and prices rising by almost a quarter between 2021 and 2025. 2022-23 saw the steepest fall in living standards in any single year since records began.
Behind all this collective belt-tightening lies a much more depressing reality: growth in disposable income – how much we have available to spend on stuff – has slowed to a crawl.
In the decade to 2005, typical working-age household incomes grew by around 3% a year. Since then, they've grown by 0.3%. That might not sound like much of a difference, but it compounds – at 3% a year, a household ends up around 80% better off after two decades. At 0.3%, they're only around 6% better off.
And while we're spending more than ever, we're getting less for it. All in all, the average household is buying around 12% less than it was in 2005.
Franklin was right that a small leak can sink a great ship. But for most households, the leaks might not be the problem – it's the waves that have been coming over the side for almost 20 years.
But what about the spending on stuff we just want?
After all, the 50/30/20 model says 30% of disposable income can be used on the things that just make life worth living.
Let's take a look:
| Income decile | "Wants" spending per month | Disposable income per month | "Wants" as a % of income |
|---|---|---|---|
| 1 | £386 | £866 | 45% |
| 2 | £469 | £1,605 | 29% |
| 3 | £606 | £2,129 | 28% |
| 4 | £726 | £2,651 | 27% |
| 5 | £742 | £3,214 | 23% |
| 6 | £933 | £3,771 | 25% |
| 7 | £1,006 | £4,425 | 23% |
| 8 | £1,288 | £5,228 | 25% |
| 9 | £1,535 | £6,591 | 23% |
| 10 | £2,065 | £11,214 | 18% |
Across the income spectrums, most households – except those in decile one who are constrained by a low disposable income – actually spend less than 30% on the good stuff.
A household right in the middle of that table with a disposable income of around £3,200 a month spends just 23% on non-essentials. Meanwhile, those at the top of the income scale, with a disposable income of almost £12,000, spend only 18%.
For most people, hitting 50/30/20 would actually mean spending more of their cash, rather than less – which might be enjoyable and reckless in equal measure.
What's just as interesting is how our non-essential spending has changed over the years. For the average household, recreation and culture spending – hobbies, days out and holidays – is up 7% since 2005 when adjusted for inflation, and at £370 a month is now the single biggest item in the household "fun" budget.
As it turns out, we're happy to cut back on clothes, restaurants and booze, but you can pry the fortnight in Lanzarote out of our cold, dead hands.
How much we're saving and investing
So what about how much we're setting aside for future rainy days?
Following the 20% guideline would have someone on a £25,000 salary squirreling away roughly £346 a month. This would put them well above the average household saving £288 a month, according to data from Natwest.
At the other end of the scale, someone on a £150,000 salary would be saving roughly £18,000 a year – remembering it's based on take-home pay, not total pay – which isn't even enough to hit the annual £20,000 ISA allowance, and certainly not what's needed to build a comfortable cushion that would help maintain a standard of living in retirement or cover you in the event that life goes awry.
In other words, this is a rule that doesn't exactly jive with what's either financially realistic or sensible.
Where the 50/30/20 rule fails for 60% of UK households when it comes to essential spending, it impacts a further 9% in another way – almost all of them higher earners – by significantly under-saving.
Note: whilst the 50/30/20 rule allows for higher-than-20% savings, we believe it's unlikely someone following it would decide to start saving a significantly higher portion of their income.
The amount of people in the UK actually hitting a 20% savings target is hard to say, but the answer is most likely: not many. The UK's household savings ratio – the percentage of total disposable income that's saved rather than spent – also sits at around 9%.
A new approach for UK savers
All things considered, the trouble with 50/30/20 is that it gets a lot of numbers wrong, for a lot of people, a lot of the time.
Needs often can't be squeezed into half your income, hardly anyone reaches the 30% for wants, and 20% for savings is impossible at the bottom and not enough at the top.
The deeper problem is that it takes a flat slice of everything you earn, when what matters is how much you've got spare. Two households on the same income can have wildly different amounts left over, depending on whether they rent or own, where they live and how many people they're feeding.
What's needed is a rule that starts from what's actually achievable, asks for a lot from people with plenty and not much from people without, suits single people, couples, and families alike, allows for differences in lifestyle choices, and still works in 20 years – regardless of inflation.
After research, analysis, and running hundreds of our own simulations, we found the answer: there isn't one. So, we built one.
The "40 Over" saving and budgeting rule
Despite sounding like a depressing singles night in the run-down part of town, 40 Over is simply the working title of our brand-new budgeting rule that recommends you to save 40% over a certain point.
To work out where that line should sit, we modelled various different household types – from a single person to a couple with three children – at incomes from £20,000 up to £1 million, and tested which threshold left the most households with enough to live on now, and hopefully enough saved to be secure and retire later.
The figure that worked best came out, purely by chance (on our part at least), at almost exactly that of the State Pension figure – around £12,500 a year per adult.
The problem with using a set figure is that it quickly becomes outdated and ineffective as the value of money degrades over time.
However, State Pension increases every year in line with inflation at a minimum (yes, even under the newly announced double lock regime) meaning we can use the State Pension figure – currently £12,548 – and the rule will allow you to update your spending and savings figures every year going forwards.
The amount is very close to what the lowest-income fifth of UK households actually spend on essentials, somewhere between £11,200 and £13,300 a year, so it seems a good measuring stick to base things on both in terms of mathematical simulations and things us normal human beings actually understand.
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.
That might seem complicated in parts, but in its simplest form: take your total pay including pension contributions, subtract State Pension amounts, and save 40% of what's left. Spend 15% of your total pay on fun. If you're a very high-earning household, implement a simple rule to prevent your essential costs creeping up too much.
So on £2,500 a month with £200 going into a pension, you'd be saving £662 in total – but £200 of that is already your pension, so only £462 comes out of your pay packet. £405 is yours to spend on whatever you like, leaving £1,633 for the rent, the bills, the food shop, and other essential costs.
Who it works for
We ran our budgeting model against the 50/30/20 method for a range of scenarios, and it significantly outperformed – in fact, there was no household, in any of our scenarios, where 50/30/20 passed but 40 Over failed.
Who each rule works for
Household take-home pay plus pension contributions, per year
We looked at four areas for passes and failures, across nine household types and 15 income levels:
- Can basic needs be met?
- Are people saving enough?
- Are people over-saving?
- Will people have money to enjoy themselves?
And what's important to note is that we actually don't want to find a model that suits 100% of people based on their current spending habits; we want a model that guides sensible expenditure and saving going forward wherever possible, without giving everyone free rein to spend unsustainable amounts of cash.
As we’ve already seen, 50/30/20 falls short for the bottom six deciles of household incomes. 40 Over covers essentials for almost everyone, mostly with the exception of the lowest-income tenth of households – a group that spends more on essentials than it earns in total – a situation that would not be resolved by any budgeting tactic.
For a full analysis of the viability of 40 Over, read our full breakdown.
Under 50/30/20, everyone is told to save 20% whether they can afford it or not. With 40 Over, savings are nothing at the bottom – focus on paying your bills – and much more than 20% for higher earners.
Bottom line
Ultimately, there’s a reason we see the same budgeting advice recycled over and over again. It’s easy to write, impossible to disprove, and puts the responsibility squarely on you if you can’t make it work.
The problem is that far too much of that advice fails to reflect the economic reality for millions of UK households faced with rising fixed costs and incomes that fail to keep pace.
And a budgeting rule that sets the bar too high doesn’t just set you up for failure; it runs the risk of disengaging you from personal finance altogether – the exact opposite of what it’s intended to achieve.
We hope our framework offers a more realistic – and slightly less depressing – alternative.
Is any of it glamorous? No. Is it more useful than a budgeting rule dreamt up 20 years ago by Americans who never had to worry about council tax? We certainly hope so.
Methodology
All household spending figures come from the ONS Living Costs and Food Survey, published as Family spending in the UK for the financial year ending 2025.
Figures for the average household have been adjusted by Financial Interest to 2026 prices by COICOP spending category. Council tax was uprated separately using the change in the MHCLG average per dwelling. Mortgage interest is not covered by CPI, so it has been left at its FYE 2025 level.
ONS categories don't sort neatly into needs and wants, so we've made a judgement on each. Needs cover housing, fuel and power, mortgage interest and capital repayment, food, transport, communication, insurance, clothing, toiletries and cleaning products, health and education. Wants cover recreation and culture, restaurants and hotels, holidays, alcohol and tobacco, furniture and appliances, hairdressing and cosmetics, personal effects, gifts and charity. Some spending will inevitably fall on the wrong side – clothing includes fashion as well as school shoes – but it should broadly balance out. Our simplified figures will not be 100% accurate, but they're close enough to paint a realistic picture overall.
Mortgage capital repayments have been added back in, because ONS treats them as buying an asset rather than spending. They aren't published by income decile, so we've estimated them at 47% of each decile's property spending, the share they represent across all households. Cleaning products and the health and education figures are estimated the same way.
Where figures are shown as a share of income, income is after Income Tax, National Insurance, Council Tax and workplace pension contributions, to approximate the take-home pay that the 50/30/20 rule divides up. ONS doesn't publish workplace pension contributions by income decile, so these are estimated at 81% of each decile's combined pension and life assurance figure, the proportion they represent across all households.
All decile figures are median averages for that tenth of households, so around half of each group will spend more than shown (and half less).
We've published a full breakdown and analysis of 40 Over separately.
