The 50/30/20 Budget May Just Force You To Save 20% Of Your Income

Every day our readers and users tell us how they should get more loans because they have insufficient income to survive after paying off all of their existing debts. It’s also not uncommon for Malaysians who just don’t know what happened to their paycheck on the second week of the month.

These stories, while heartbreaking, can be frustrating to hear.

Our Millennial Survey found that the biggest concern most Malaysians have when it comes to their finances is the high cost of living. But if I can be brutally honest, I believe the biggest problem we have is the lack of financial planning.

I mean, of course the cost of living has skyrocketed and incomes are trying to catch up, albeit at a snail’s pace. But the disparity between income and the cost of living is not so great that it is impossible to survive.

Maybe we should reflect on our own and take a look at our finances to see how we can cut and trim to match our current cost of living. We can’t have it all – buying our first home and shopping every weekend, something has to give.

So how do you do this? What can you sacrifice and what are you spending? Here I break down budgeting in the easiest way for you and show you how you can benefit from it:

The 50/30/20 budgeting method

We can’t say it enough times: Don’t spend more than what you earn! And the best way to do that is to keep track of what you are spending.

A simple way to keep track of your money is percentage budgeting. It’s a simple and straightforward concept – instead of allocating a fixed amount to each line item, you set a target percentage for each expense category.

One guideline we like to use for percentage budgeting is 50/30/20.

Here is the breakdown:


Invoices and fixed expenses such as rent,
mortgage, basic groceries, etc.


Dining out, entertainment, vacation,


Retirement, down payment for a new home, upbringing of the child, etc.

How much you need to budget, under the 50/30/20 rule:

1. Needs – 50%

Fixed costs are mostly essential expenses and represent half of your income.

For an average of 20 years, fixed expenses generally consist of rent (if you are not staying with your parents), groceries, the phone bill, an Internet subscription, a car loan. (if you have a car), monthly parking at work, insurance premium and more.

Needs – 50%

Net revenueRM3,500 per month
50% for fixed expensesRM1750
• room rental


• Cell phone bill


• Internet subscription


• Grocery stores


• Student loan repayment


Total fixed expenses


However, if you’ve listed all of your needs and they’re over 50%, it’s time to take a careful look at your spending. You might be able to downgrade your phone or internet subscription, or even sell your car and turn to public transportation.

The beauty of a budget is that you will immediately identify where the problems lie and be able to make adjustments in your finances.

2. Wants – 30%

Do not allocate more than 30% of your take-home pay to needs.

These are expenses that you don’t necessarily need, but are nice to have, such as dining out, shopping, hobbies, and entertainment.

To determine how much you can spend for your needs, first deduct your fixed costs and contributions to financial goals from your income. This way, you will know that the balance of needs is really yours to spend the way you want.

Wants – 30%

Net revenueRM3,500 per month
30% for flexible spendingRM1 050
• Eat out on weekdays


• Eat out on weekends


• Grocery stores


• Household items


• Gasoline and toll


• Entertainment


Total fixed expenses

RM1 050

This category will require you to exercise discipline in order to be on the right track. If you’ve splurged for a nice dinner with your friends, you’ll need to cut back on spending elsewhere. Perhaps, by making your own lunch for the next few days, or by forgoing paid entertainment for the month.

The key here is to make sure that the overall expenses allocated to needs do not exceed 30% of your net income.

3. Savings – 20%

This refers to the savings you set aside for emergencies and to meet your financial goals. Don’t know what your financial goals are? Ask yourself what you want in five, 10, 20 and 30 years? How do you see your retirement?

Financial goals are not set in stone and should be reviewed every few years. However, having a rough goal will help you achieve them.

If you allocate 20% of your income to your goals, you will ensure that your finances are on track to reach your goal.

Assuming you start with RM3,500 net income per month, and average a 5% pay rise each year. Here’s how 20% of your net income makes a difference:

Monthly pay
total savings
Financial goals
3,500 RM
8,400 RM
You would have saved RM15,000 in a year and a half for your trip to Europe.
28,000 RM
You would have saved around 52,000 RM for your first home down payment (520,000 RM)
RM4 052
39,400 RM
52,000 RM
10,750 RM
692,000 RM
You would have saved RM692,000 for your children’s college education.
19,306 RM
RM 1,978,600
You would have saved a large retirement fund to supplement your EPF savings.

* Assuming an average return of 6% per year.

While this method of budgeting sounds simple enough, it takes some discipline to stick to it. And it doesn’t work like a miracle where your finances will improve and your debts will disappear overnight. You still have to work hard to make a lasting impact on your finances.

The most important thing about budgeting is that it should be personalized to suit your lifestyle and spending habits. This budgeting rule serves as a guide to lead you in the right direction. Once you have an idea of ​​what a balanced budget looks like, you can create your own budget to meet your financial goals.

If this budgeting method doesn’t work for you, try this unconventional budgeting method.

This article was first published in 2017 and has been updated for freshness, accuracy and completeness.

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Jothi Venkat

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