30-40-30 Rule: A Simple Way to Split Your Money

Ever feel your paycheck disappears before you know why? The 30-40-30 rule gives you a clear snapshot of where every pound should go, so you stop guessing.

How the 30-40-30 Rule Works

The rule divides your after‑tax income into three buckets. Thirty percent covers your essential living costs – rent, groceries, utilities. Forty percent goes toward debt repayment or high‑interest obligations, which most people need to shrink fast. The remaining thirty percent is saved or invested for the future.

Putting the Rule Into Practice

Start by writing down your net monthly income. Multiply it by 0.30 to get the amount for necessities. Do the same for the debt bucket and the savings bucket. If your numbers don’t line up, adjust the percentages a bit – the goal is to keep the three parts roughly balanced, not to stick rigidly to 30‑40‑30.

Let’s look at a real‑world example. Jane earns £2,800 after tax. Thirty percent (£840) pays her rent, bills, and food. Forty percent (£1,120) goes toward her credit‑card balances and a car loan. The final thirty percent (£840) lands in a high‑interest savings account and a low‑cost index fund.

Seeing the numbers laid out makes it easy to spot problems. If your debt slice is higher than 40 %, you might need to cut back on non‑essential spending or look for a cheaper loan. If the savings part feels too small, try refinancing debt to lower interest and free up cash.

Here are a few quick tips to keep the rule working for you:

• Review your budget every month – life changes, and so should your percentages.
• Automate the savings portion; a direct debit to an ISA or pension makes the habit stick.
• Prioritise high‑rate debt first; the faster you clear it, the more you can shift into savings.

A common mistake is treating the rule as a one‑size‑fits‑all. If you have a mortgage with a low rate, you might allocate less than 40 % to debt and boost savings instead. Conversely, if you’re juggling multiple high‑rate loans, you could push the debt bucket up to 50 % temporarily.

Bottom line: the 30‑40‑30 rule is a flexible framework, not a strict formula. It helps you see where money goes, forces you to tackle debt, and builds a habit of saving. Try it for a month, tweak the ratios, and watch how much clearer your financial picture becomes.

Ready to give it a go? Grab a notebook, plug in your numbers, and start splitting. You’ll be surprised how much control a simple three‑step split can give you.