The 50-30-20 Budget Rule
How to split take-home pay into needs, wants and savings, an Indian worked example, and how to adjust it when rent or EMIs are high.
The 50-30-20 rule is a starting framework for dividing your take-home pay after tax:
- 50% for needs: rent, groceries, utilities, transport, insurance premiums, loan EMIs.
- 30% for wants: eating out, shopping, travel, subscriptions.
- 20% for savings and investing: emergency fund, SIPs, retirement, debt prepayment.
Worked example
Take-home pay ₹60,000 a month gives ₹30,000 for needs, ₹18,000 for wants and ₹12,000 for savings. A ₹12,000 SIP at an assumed 12% return for 15 years grows to about ₹60 lakh on the SIP calculator, though returns are never guaranteed.
When it does not fit
In metro cities rent and EMIs can push needs well above 50%. If so, adjust to something like 60-20-20 or 60-10-30 and keep the savings share as high as you can. The rule is a guide, not a law. The key point is that savings are set aside first, not from whatever is left.
Order of priorities for the savings part
- Build an emergency fund first.
- Clear high-interest debt such as credit card balances; see the credit card interest guide.
- Get enough term insurance and health cover.
- Then invest regularly toward long-term goals, raising the amount each year with a step-up SIP.
Educational content, not personal financial advice.
Frequently asked questions
Should the percentages use salary before or after tax?
Use take-home pay after tax and other deductions, because that is the money you can actually spend.
What if I cannot save 20%?
Start with what you can, even 5–10%, and increase it as income grows.
More guides
Calculators
Last reviewed: October 2026. General education, not financial advice.