65/15/20 vs 50/30/20 Budgeting Formula: Which Is Suitable for Your Salary?

For many Kenyans, creating a workable budget is easier said than done. With varying salaries, lifestyle needs, and personal financial goals, one-size-fits-all approaches rarely work.

Two of the most popular budgeting frameworks are the 65/15/20 and 50/30/20 formulas. Both offer structured ways to manage income, but each works best depending largely on your salary, lifestyle, and financial priorities.

The 50/30/20 Formula

The 50/30/20 rule is one of the most widely recommended budgeting frameworks. It divides your net income into three broad categories:

• 50% for needs: These are essential expenses that you cannot avoid, such as rent, mortgage, utilities, groceries, transport, and mandatory loan repayments.
• 30% for wants: This includes discretionary spending like dining out, shopping, entertainment, subscriptions, and non-essential travel.
• 20% for savings and debt repayment: This portion is allocated to your emergency fund, retirement savings, investments, and any high-interest debt repayment.

This model is simple and works well for individuals with steady salaries and moderate financial obligations. For instance, a mid-career professional earning Ksh80,000 net pay in a month could allocate Ksh40,000 to essentials, Ksh24,000 to discretionary spending, and Ksh16,000 to savings or investments. It provides a clear balance between enjoying your income today while still preparing for the future.

The main advantage of the 50/30/20 formula is flexibility. You can adjust categories slightly to account for regional cost-of-living differences in Nairobi, Mombasa, or Kisumu, or to prioritize debt repayment when you have significant liabilities. 

The 65/15/20 Formula

The 65/15/20 formula is slightly more aggressive on essentials. It allocates:

• 65% for essential expenses: This is typically recommended for people with higher living costs or those who live in urban areas where essentials take up a larger share of income.
  
  
• 15% for discretionary spending: This encourages a more frugal approach to wants. Dining out, shopping, and other non-essentials are limited, forcing you to make more conscious spending decisions.
• 20% for savings and debt repayment: Similar to the 50/30/20 approach, this segment prioritizes building financial security.

This approach works well for individuals whose essentials genuinely consume a higher portion of their income. By capping discretionary spending at 15%, the 65/15/20 rule encourages stricter money discipline.

The downside is that it leaves less room for lifestyle enjoyment, which can feel restrictive over time. Yet, it can be particularly effective if your financial goals are aggressive—like saving for a down payment on property, a car, or starting a new business.

How Your Salary Affects Which Formula to Use

Your income level and lifestyle largely determine which formula is more suitable.

• Ksh40,000–Ksh80,000 

If you're starting in your career, your primary financial challenge is survival. At this income band, your essential needs - rent, food, transport, and family support are likely pushing your spending well past the ideal 50% mark.

The recommended formula is the 65/15/20 (aggressive control). This approach forces you to be realistic. By dedicating 65% to needs, it acknowledges the high cost of city living. Crucially, it protects the essential 20% for savings/debt by ruthlessly shrinking your wants to just 15%. 

• Ksh80,000+ 

In this case, essentials are now likely manageable within 50% of your income. The 50/30/20 (balanced growth) is the perfect baseline for you. It provides a clear framework for balancing immediate enjoyment (the 30% for wants) with significant future growth (the 20% for savings/investment).

Practical Tips to Make These Formulas Work

No matter which model you choose, the effectiveness of budgeting depends on disciplined execution. Here are practical steps for Kenyans looking to implement these formulas:

1. Track Your Spending: Start by knowing where your money goes for a month. Use mobile apps, spreadsheets, or even simple notebooks. Without this step, percentage-based allocations become guesswork.
2. Prioritize Essentials: Ensure you clearly define what counts as essential—rent, food, utilities, transport, loan repayments. Avoid letting discretionary spending seep into this category.
3. Automate Savings: Set up automatic transfers to your Sacco, mobile savings account, or investment portfolio. Automating ensures that your “savings” slice isn’t spent accidentally.
4. Review and Adjust: Budgets are not static. Your income, expenses, and goals will evolve, so review your allocations every quarter.
5. Plan for Irregular Expenses: Kenyan households often encounter irregular costs such as school fees, vehicle maintenance, or festive spending. Build a sinking fund to cover these without disrupting your budget.
6. Avoid Lifestyle Inflation: As your income grows, resist the temptation to increase discretionary spending proportionally. Instead, increase your savings or investments.