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Budget model

The 50/30/20 budget: A simple model with room for life

The 50/30/20 model divides after-tax income between needs, wants and savings or debt repayment. Use it as a guide, not a pass-or-fail rule.

The three parts

Roughly 50 percent goes to needs such as housing, food, transport and insurance. About 30 percent goes to wants and flexible spending, while 20 percent goes to savings or extra debt repayment.

The boundary between needs and wants is personal.

Example with DKK 25,000 after tax

As a guide, that gives DKK 12,500 for needs, DKK 7,500 for wants and DKK 5,000 for savings or extra repayments. Adapt the model when housing alone takes half your income.

Make the model useful

Map actual spending first. Then use the percentages to identify one area to change. Moving savings from two to five percent can be a better first goal than aiming immediately for twenty.

Frequently asked questions

Is the 50/30/20 rule realistic for everyone?

It is a useful guide, but housing, children, transport and income mean many households should adapt the percentages.

Does pension count towards the 20 percent?

The model is used in different ways. Be consistent about whether employer pension is included.

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