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Spending or saving - how to find the right balance?

Budget. Does anyone like that word? How about this instead - the 50/15/5 rule?

It's our simple rule of thumb for saving and spending: aiming to allocate no more than 50% of take-home pay to essential expenses, 15% of pre-tax income to retirement savings, and 5% of take-home pay to short term savings.

Whatever's left over can then be spent as you choose - on leisure, restaurants, holidays, etc.

Consider the Fidelity 50/15/5 rule



Essential expenses



(including employer contributions) towards retirement



Short term savings for unplanned expenses

Why 50/15/5? We looked at hundreds of different scenarios to come up with a spending and saving guideline that would help people save enough to retire. Our research suggests that by sticking to this rule, you'll have a good chance of staying on top of things financially now - and maintaining your current lifestyle in retirement.

Step 1. Essential expenses: keeping it below 50%
Step 2. Retirement savings: how to get to 15%
Step 3. Short-term savings: how to get to 5%

Now, let's be completely honest. With housing, food and energy costs as high as they are right now, it could well be that the
50/15/56 split isn't realistic for you. Instead, use it as a starting point, adjusting the proportions to suit your own wallet. Or
simply keep it at the back of your mind as a goal to reach in the future.

Download your free budget planner

Our simple budget planner can give you an overview of how and where you're spending your money each month

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