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Guidance

How to spend your income

How to spend your income

Everyone has different circumstances which dictate how much they spend on different areas of their life.

There’s no set rules but if you’re looking for something to aim for it could be worth considering the 50-30-20 guide.

In this method your post-tax income is broken up in the following way:

  • 50% is spent on essential living expenses like rent/mortgage payments, bills and food
  • 30% is discretionary spending such as going out and buying clothes
  • 20% is put into savings and/or super (see caps for super contributions).

While the 50-30-20 method is a solid guide, it may not always be achievable – at this stage you may need to focus on repaying debts rather than saving.

However, if you find that you’re spending well over 30% of your income on going out, it may be a good idea to think about scaling this back so that you can put that money into other areas of your life.

Crosscheck your budget to see if there are any big variances with the 50-30-20 guide, if there are ask yourself whether there is a solid reason for this? If there isn’t, could it be worthwhile making some changes? 

Up next: How to pay off debt, or skip to How to create a savings habit.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.