How Much Should I Save Monthly? An Analysis of The 50/30/20 Rule

September 6, 2022

Written by Isaac Sesi


How much are you able to save at the end of every month? 

US Senator Elizabeth Warren, a former bankruptcy law professor, is credited for coming up with the 50/30/20 rule when it comes to spending your income. According to the popular rule, you should reserve 50% of your budget for essentials like rent and food, 30% for discretionary spending and at least 20% for savings.

This means that if you earn GHS 1000 monthly, you should save a minimum of GHS 200.

Does this seem feasible in your context? 

Personal saving is very important in building financial security. More than income or investment returns, your personal saving rate is the biggest factor in securing your future. Saving money helps navigate emergencies, meet financial obligations, and build wealth.

Despite knowing the importance of savings, many people often lose sight of it and spend more of their money in the present.

There are numerous budgeting and savings plans on the internet for anyone who wants to plan their expenditure very well. Some of these methods and plans are cumbersome and complicated, comprising spreadsheets, pivot tables and heuristics to memorize.

But people want simple and easy ways of doing things, which is why the 50/30/20 rule became popular in the US and across the world. All they needed to do was keep those three numbers in mind throughout the month to budget pretty effectively.


The 50/30/20 rule or budget is when you take your monthly takehome and dedicate 50% to needs, 30% to wants and 20% to savings. 


Needs include mandatory expenditures that you simply can’t skip. Things like rent, utilities, food, transportation, health care and Wi-Fi and mobile data plans — you know, “adulting” stuff. This is your top spending category. 

Wants is the middle spending category — things that might make life better, but that you don’t necessarily need to pay for each month.

Things that fall into the wants category include, but certainly aren’t limited to restaurants and takeout, entertainment and media subscriptions, tourism and travel, concerts and movie tickets, fashion and clothing.

This is also known as discretionary spending. 

Some people struggle to distinguish between mandatory and discretionary spending. It comes down to lifestyle.

No matter how blurred the lines between them are to you, simply ensure that you are not spending beyond 80% of your income on needs and wants. 

Finally, 20% of your monthly net income should be put into savings. You could stash it in your high-yield savings account, a retirement account, or even buy bonds with it — anywhere the money can grow is ideal.

While this budget is simple to understand and implement, for many young Ghanaians, saving 20% of their income could be aggressive. It requires a lot of discipline and some sacrificing of wants especially to pull it off.

And that’s what savings are about  — pausing some present pleasures for a better tomorrow. It always pays off to save.

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However, looking at the current state of things in Ghana including the average salary of the working class and the cost of living, in many cases, 50% or a combined 80% is not enough to cater for needs and needs and wants respectively.

The 50/30/20 plan may also not be ideal for young people with children because the costs associated with childcare are both high and unpredictable. What to do then?

Saving something is better than nothing.

The 50/30/20 rule is not cast in stone. You can tweak the ratio in a way that suits your earnings and spending. 60/30/10, 70/15/15, 75/15/10 etc. Just make sure that you are always reserving something for savings.

Additionally, start small and grow your savings as you get better with your spending. Keep the 20% goal in mind and build towards it. Start with 1%. When that doesn’t burn so bad, go up to 2% or even 3%. Celebrate your saving milestone and keep pushing to save more and more.

Conversely, maybe you take a crazy leap and start at 10%. If that leaves you stressed and strapped, scale back to 5% and grow slowly. It’s a process. When there is a change in your income, change your saving plan to reflect that change whether it is for the better or worse.

The bottom line is this:

Ideally, you should save 20% of your salary. It’s a stretch but it is possible. By saving 20% of your income you’ll hit 25 times your annual income in about 30 years. That implies that 30-year-olds with no prior savings who start saving 20% of their incomes today will hit this target by the time they retire at 60.

It requires personal austerity measures. The more you limit your expenses, the sooner you’ll achieve your personal savings goal.

Living a more modest lifestyle both reduces the overall amount of money you’ll need for retirement and allows you to save more during your working years.

If you cannot afford to save 20%, all hope is not lost. Start from somewhere. Start small and test your limits and increase your savings rate. Building up financial strength takes discipline and consistency, as well as a willingness to listen to your bank account when it tells you your current regimen is just too intense.

Don’t deprive yourself too much today but always keep your general and specific saving goals in mind and let them motivate you to go all out. 

Remember that saving something is better than nothing. You cannot gain financial independence and wealth if you do not save at all. Sincerely assess your lifestyle and decide on how much you can afford monthly. 

The most important thing is to start saving. How much will vary from person to person, as well as how one progresses in life.

About Mesika

Hey there, my name is Isaac Sesi. I built Mesika to provide free personal finance resources online to help young Ghanaians become smarter about their money.

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1 Comment

  1. Paul Essah

    I love this a lot. Practical!!!


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