How to Apply the 50/30/20 Budget Rule? | Giraffy
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Budgeting

How to Apply the 50/30/20 Budget Rule?

Managing your finances can seem overwhelming, but the 50/30/20 budgeting rule offers a simple yet effective way to handle your money.

How to Apply the 50/30/20 Budget Rule? Managing your finances can seem overwhelming, but the 50/30/20 budgeting rule offers a simple yet effective way to handle your money. Popularized globally, this budgeting strategy is equally relevant for individuals living in Saudi Arabia, allowing you to balance your needs, wants, and savings clearly and effectively. Here's how you can apply the 50/30/20 budget rule specifically within the Saudi context.

What is the 50/30/20 Budget Rule?

The 50/30/20 rule is a straightforward budgeting approach that helps you allocate your monthly income into three categories:

  • 50% Needs: Essentials like housing, groceries, utilities, and transportation.

  • 30% Wants: Discretionary spending, such as dining out, shopping, or entertainment.

  • 20% Savings and Debt Repayment: Prioritize saving and paying off debt to build financial stability.

Applying the 50/30/20 Rule in Saudi Arabia

50% - Essential Needs

In Saudi Arabia, essential needs typically include:

  • Housing (rent or mortgage payments)

  • Utilities (electricity, water, internet)

  • Groceries and household supplies

  • Transportation (car payments, fuel, public transportation)

  • Healthcare (mandatory health insurance and medical expenses)

Tip: Utilize platforms like Giraffy to compare housing financing and utility bills, ensuring you're getting the best deals.

30% - Discretionary Spending

This includes spending on items and services you enjoy but aren't strictly essential, such as:

  • Dining out at restaurants or cafes (popular spots like Riyadh Boulevard or Jeddah Waterfront)

  • Entertainment (cinema, streaming services, events)

  • Shopping (local malls and online platforms)

  • Travel and weekend getaways (domestic trips to places like AlUla or Abha)

20% - Savings and Debt Repayment

Consistently allocating at least 20% of your income to this category is crucial. It includes:

  • Building an emergency fund

  • Investing in retirement plans

  • Paying down debts like personal loans, credit cards, or car financing

Consider using local financial services or Sharia-compliant investment options available through Saudi banks like Al Rajhi Bank or SNB.

Practical Example

Imagine your monthly income is SAR 10,000:

  • Essential Needs (50%): SAR 5,000 allocated to rent, groceries, utilities, and transportation.

  • Discretionary Expenses: Allocate SAR 3,000 for leisure, dining, entertainment, and shopping.

  • Savings and Debt Repayments (20%): Allocate SAR 2,000 to savings, investments, or clearing debt each month.

Tips for Success

  • Use budgeting apps like Giraffy for automated tracking and clearer visibility.

  • Regularly reassess your budget every 3-6 months to adjust for changes in lifestyle or financial circumstances.

  • Be flexible but disciplined—occasionally overspending on 'wants' happens, but adjust accordingly next month to maintain balance.

Common Pitfalls to Avoid

  • Overspending on discretionary expenses: Limit dining out and entertainment costs if they start to exceed 30%.

  • Underestimating expenses: Always include occasional costs like Ramadan or Eid spending, which can significantly impact your monthly budget.

Final Thoughts

The 50/30/20 budgeting rule is an effective framework to gain control over your finances in Saudi Arabia. By clearly defining essential spending, managing discretionary expenses, and consistently saving or repaying debt, you'll establish financial habits that support your long-term financial health and prosperity.

Ready to start budgeting effectively? Discover more tools to simplify your budgeting journey with Giraffy today.