What is a budget?
A budget is a plan for where next month’s income will go. Tracking tells you where money went; a budget says where it will go. Comparing the two shows whether the plan is working.
Budgeting rules are ready-made templates for dividing income, so you don’t have to think through every expense from scratch. No rule fits everyone; each needs adjusting to your income, family and responsibilities.
Say Nadia, as soon as her salary arrives, sets aside rent, groceries and money for her parents; puts Tk 5,000 into savings; and leaves the rest for outings and hobbies. Mid-month, before accepting an invitation, she no longer wonders “will I have enough?”, because she knows what is left in her fun share. The numbers are only an example.
Why it matters to an investor
- Regular investing money comes from the budget: unless the savings share is set first, “I’ll save whatever is left” often ends up as nothing.
- So you don’t have to cash in investments early: with spending planned, there is less risk of breaking an FDR or selling shares at a bad time for a sudden need.
- To turn goals into monthly amounts: “this much in five years” becomes a usable “this much every month” in the budget.
- To hold back lifestyle inflation: when income rises, a budget keeps spending from rising automatically with it.
The 50/30/20 rule
The best-known rule was popularised by the 2005 book All Your Worth, co-written by American law professor Elizabeth Warren. Take-home income is split 50% to needs (rent, groceries, bills, instalments), 30% to wants (eating out, travel, hobbies) and 20% to saving and paying down debt.
In Bangladesh, needs take more than 50% for many households. According to BBS’s HIES 2022, the average household spends about 42% of its budget on food alone. Add rent and support for parents or relatives, and 50% is easily passed. So many people start with splits like 60/20/20 or 70/15/15. The point isn’t the exact ratio; it is keeping a fixed share for savings.
A few other methods
- Pay yourself first: move your savings out the day your salary arrives (into a DPS or a separate account, for example) and live on the rest. Save before spending, not after.
- Zero-based budget: give every taka of income a job until nothing is “unassigned”. Saving counts as a job too. It takes time but is the most detailed.
- Envelope method: keep money for groceries, transport and fun in separate envelopes or separate wallets. When an envelope is empty, that category is done for the month.
Budgeting on an irregular income
Freelancers, business owners, farmers and people on commission see income swing month to month. Here, plan your needs around a figure close to your lowest-earning months of the past year. Put good months’ extra into a “buffer” account first, to cover the gaps in lean months.
Worked example
- 50/30/20: needs 20,000, wants 12,000, savings Tk 8,000.
- But say rent is 12,000, groceries 8,000 and money for parents 4,000: needs alone are Tk 24,000, or 60%.
- So a 60/25/15 split: needs 24,000, wants 10,000, savings Tk 6,000.
- When the salary rises, sending half of each raise to savings moves you gradually towards 20%.
Result: you needn’t follow the rule exactly; what matters is fixing the savings share first and raising it over time. The numbers are only an example.
See the numbers as a table
| Needs | Wants | Savings | |
|---|---|---|---|
| 50/30/20 | 20,000 | 12,000 | 8,000 |
| 60/25/15 | 24,000 | 10,000 | 6,000 |
Common mistakes
- Dropping budgeting altogether because a rule doesn’t fit exactly. Adapt the template; don’t abandon it.
- Leaving zero for wants. An overly strict budget collapses within weeks; a little room for enjoyment makes it last.
- Not budgeting for irregular costs like Eid, admissions or medical bills, then raiding savings.
- Making a budget once and never revisiting it. Income, prices and family needs change; update the budget every few months.
No budgeting rule is magic. The right one for you is one you can keep up month after month, with savings coming before spending.