How to budget income using the 50/30/20 rule.

How should one budget? Where do I begin? Let me start by saying that personal finance is not a one size fits all kind of thing. Knowing that let’s pick a subject.

What should we call him? I’ve chosen him because men don’t really have that many expenses. You know that I’m right.

Let’s call him Alex.


I have a few assumptions about Alex. Alex is 24 years old. This is his first permanent and stable job. The job pays him ksh. 20,000 after taxes. His boss doesn’t have a medical cover for him yet. Alex has no dependents; he is not married yet. This young man occasionally sends something to his mother. He lives near his place of work therefore no transport cost. Maybe only the occasional Boda ride in the wee hours of the night. He is also a Christian. I know that you are wondering why all this is necessary. But I’ll get to that soon.

What else have I left out? Oh yes, just like many young people his age he has zero savings and zero investments.An image of a wallet with a few notes of dollars
Alex has decided to take control of his money situation. He has decided to tell his money where to go.

He has decided to stop wondering where his money goes off to. This means he has decided to start budgeting his income.

Financial literacy

What is the 50/30/20 budgeting rule?

Imagine of a calculator,  pen and piece of printed paper of a budget on a white surface

The 50/30/20 budgeting rule states that 50% of your income should go into your needs. This includes housing/ rent, paying utility bills (electricity and water bills), food, and so on.

30% of your income should go into satisfying your wants. That is fun and entertainment money.

20% of your income should go into savings and investments. That’s reasonable don’t you think?
Well in my experience with the rule, it isn’t 100% perfect. Therefore, it’s better to use it as a guideline.

Now back to our subject, Alex. How does Alex budget his ksh. 20,000 salary using the 50/30/20 budgeting rule?

How to budget ksh. 20,000 income.

Image of a laptop on a table displaying graphs and charts of a budget According to the 50/30/20 budgeting rule, 50% of Alex’s income should go into his needs. 50% of Ksh. 20,000 is Ksh. 10,000.

This amount will go into paying Alex’s rent of Ksh. 3,500, utility bills (water and electricity) of ksh.500 per month, shopping of Ksh. 1,000 and buying food(groceries) for the month at KSH. 3,000 (ksh.100 per day). Remember that Alex is single.
This gives us a total of Ksh. 8,000. The extra ksh. 2,000 will go into the occasional Boda rides.

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30% goes into wants in the budget rule.

30% of ksh. 20,000 gives us ksh. 6,000.
This ksh.6, 000 will go into satisfying Alex’s cravings and the like. Wants are things that we can live without. Though we get a lot of satisfaction from them. This is fun and entertainment money.
For Alex, this amount will go into buying airtime for the month. He buys monthly Telkom bundles of Ksh. 1,000. That is 1GB per day. He also buys a monthly 1500 SMS from Safaricom at KSH. 100. The rest of the amount (KSH. 4,900) will go into eating out with friends and the occasional mutura.

Now down to 20%.

20% of the income should go to savings and investments according to the budget rule.

Image of a person putting money in a piggy bank
In Alex’s case 20% of ksh.20, 000 is ksh. 4,000.
Remember that Alex is a Christian therefore 10% of his income(ksh. 2000) goes into tithes.

He has decided that 5% will go into savings. That is ksh. 1,000 and 5% will go into investments. (ksh. 1,000). Alex has opted to invest ksh. 1,000 in a money market fund.

After doing his calculations, Alex noticed that he did not account for giving and health cover. He opted to draw this amount from the 30% wants section. He took ksh. 1000 to give his mother and ksh. 500 for the health cover.
I hope that you now understand why I said that the 50/30/20 budgeting rule is not perfect. Despite this shortcoming, I highly recommend this budgeting rule.

In conclusion, budgeting is the first step towards taking control of your money situation.
If the numbers show an ugly reality, don’t give up. Make a plan and get out of the rut. All the best in your money endeavors.

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