Financial Literacy
Budgeting Systems – 50/30/20 & Low-Income Models
Lesson
4
Why This Lesson Matters
A budget is a simple plan for your money. Without it, cash disappears in small steps—short eats, extra tuk rides, data reloads—and you are left wondering where it went. With a budget, every rupee gets a job before the month begins. You feel calm because you know what will be paid, what can wait, and what is moving you closer to your goals.
Sri Lankan prices change often. Electricity bills rise, food costs jump, and bus fares adjust. When you run on guesswork, these changes create stress. A budget gives you a steady way to adjust and still protect your goals. This lesson shows you two practical approaches: the classic 50/30/20 system and low-income models built for tight months and irregular income.
“What gets planned gets done.”
Step 1: Learn the 50/30/20 Budget (and Make It Real)
The 50/30/20 system is used around the world because it is simple:
50% Needs: the must-pay items—basic food staples, rent/boarding, electricity, water, transport to school/work, medicine, minimum debt payments, school/tuition fees.
30% Wants: nice-to-have choices—eating out, treats, fashion, entertainment, upgrades.
20% Savings & Debt: emergency buffer, short-term goals, long-term investments, extra debt payments.
Start by listing your net monthly income. If you earn daily or weekly, convert it to a monthly estimate (add up four or five weeks). Then map the amounts. For example, if your monthly income is LKR 60,000:
50% Needs → LKR 30,000
30% Wants → LKR 18,000
20% Savings & Debt → LKR 12,000
This is a starting point, not a prison. If your needs add up to LKR 33,000, shift 3,000 from Wants for now—but try to keep something in Savings & Debt. Even LKR 2,000 toward buffer or debt is worth protecting. The key is to decide on purpose before the month begins.
Make 50/30/20 real with a one-page plan. Write three headings—Needs, Wants, Savings & Debt—and list the top items under each, with amounts. Keep it visible. When you are paid, move money to each group (physically into envelopes or digitally into labeled “pots”). When a category runs out, stop or adjust something else. A budget works only when you respect its limits.
As prices change, update category amounts rather than quitting the system. If rice or vegetables go up, add a little to food and shave a little from Wants. If transport rises, fund it by reducing extras first, not by killing your buffer. A living budget moves with real life.
“Plan every rupee before it arrives.”
Step 2: Use Low-Income Models (Tight Months & Irregular Income)
For many families, needs are more than half the income. You may also be paid daily, weekly, or in irregular amounts. In these realities, you still can budget—just use percentage-based, low-income models that protect essentials and your future.
70/20/10 – for tight but manageable months
70% Needs, 20% Savings & Debt, 10% Wants.
Wants are smaller, but not zero. Keeping a little for joy prevents burnout and revenge spending.
80/15/5 – for very tight months or emergencies
80% Needs, 15% Savings & Debt, 5% Wants.
The 5% keeps life human. The 15% keeps your buffer alive and stops future crises.
Zero-Based Budget – every rupee gets a job
Income minus all planned categories equals zero on paper.
You assign jobs to rupees across Needs, Savings & Debt, and Wants until nothing is “free.”
Works well with envelopes or labeled digital “pots.”
Percentage-Per-Pay – for irregular income
Each time money arrives (daily/weekly), split it by your chosen percentages immediately.
Example with 70/20/10 on a LKR 2,000 day: LKR 1,400 to Needs, LKR 400 to Savings & Debt, LKR 200 to Wants.
No waiting, no guessing—your priorities get funded every time.
Sinking Funds – for known, future costs
Break big, predictable expenses into small monthly amounts.
Examples: exam fees, uniforms and shoes, New Year travel/gifts, repairs, health checks.
Put a little away each month, and these costs stop being “emergencies.”
Bill Calendar – for timing
Mark due dates for rent, utilities, school fees, and debt payments.
Align your cash-in days with cash-out days. If income comes mid-month, reserve part of it for end-of-month bills. Timing stress drops when you can see the month on one page.
The Golden Rule
Needs first. Pay yourself next (buffer, goals, debt). Wants last.
Budget Models at a Glance
Model | Needs | Savings & Debt | Wants | Best For |
50/30/20 | 50% | 20% | 30% | Stable income; balanced months |
70/20/10 | 70% | 20% | 10% | Tight months; still saving |
80/15/5 | 80% | 15% | 5% | Very tight months; keep buffer alive |
Zero-Based Budget | — | — | — | Every rupee assigned; great with envelopes |
%-Per-Pay (irregular) | varies | varies | varies | Daily/weekly earners; split each inflow |
Exercises: Your Turn to Budget
Exercise 1 — Build a One-Page Budget. Take last week’s 7-day expense diary (Lesson 3). Add your expected income for the month (or four weeks). Choose one model—50/30/20 or 70/20/10. Write three headings: Needs, Savings & Debt, Wants. Under each, list the top items with amounts. Total each section and check the percentages. If Needs are high, shrink Wants, but keep some Savings & Debt, even if small.
Exercise 2 — Set Up Sinking Funds. List three future costs you already expect this year (exam fees, uniforms, New Year travel). Split each into monthly amounts. Create a labeled envelope or digital “pot” for each and move the first deposit today, even if it is tiny.
Exercise 3 — Create a Bill Calendar. On a single page, mark due dates for rent, utilities, school fees, debt minimums. Mark your income days. Decide which inflow will cover which bill. If the timing doesn’t match, reserve from the previous inflow and write it on the page so you don’t double-spend it.
Exercise 4 — Try %-Per-Pay for Two Weeks. If your income is irregular, pick percentages (e.g., 70/20/10). For the next two weeks, split every inflow the moment it arrives. Record the amounts and what they funded. Notice how the stress falls when priorities are funded first.
Exercise 5 — Weekly 15-Minute Review. Once a week, sit with your one-page budget. Compare plan vs. actual. If food ran over, move from Wants; if transport is lower, top up the buffer. Adjust—don’t abandon. Write one change for the coming week and circle it.
Quick Win
Make a Must-Pay First list (food staples, rent/boarding, utilities, transport to work/school, medicine, school fees, minimum debt). Fund these before anything else this month. Move LKR 500 to your buffer today.
Common Roadblocks (and Simple Fixes)
“My income is too small to budget.” Budgeting is not about big money—it is about clear decisions. Even small incomes can choose priorities. Start with Needs, add a tiny buffer, and keep Wants small for now.
“Prices keep changing.” Adjust categories; don’t quit the plan. If food rises, reduce Wants for a month. Keep at least a small amount in Savings & Debt so your buffer doesn’t die.
“Family pressure makes me spend.” Share your one-page budget and your goals. Point to the Must-Pay list. Offer a planned treat inside the Wants amount. Boundaries are easier when they are written.
“I forget or feel tired.” Use envelopes or digital pots so the money is already separated. Put your one-page budget on the wall or save it as your phone lock screen. Make a weekly 15-minute review a habit—same day, same time.
Keeping Yourself Motivated
Make progress visible. Draw three small bars labeled Needs, Savings & Debt, and Wants. Color them in as you fund each category. When your Savings & Debt bar grows, you will feel proud. Celebrate honest effort, not perfection.
Tie your budget to your goals (Lesson 1). If cutting LKR 1,500 from Wants means you reach a short-term goal six weeks faster, write that on your budget page. Turn “I should save” into “I want to save.”
Turn leaks into fuel (Lesson 3). Each time you skip a leak—an unnecessary tuk ride or a soft drink—move the rupees to your buffer the same day and record it. Small actions add up when repeated.
Your First Step is Complete
You now know two ways to budget: the simple 50/30/20 and flexible low-income models that protect essentials and your future. The method you choose matters less than your discipline to use it every week. Needs first. Pay yourself next. Wants last. Assign every rupee before it arrives. Adjust as prices change. Keep your buffer alive.
Start today: write your one-page budget, set up two sinking funds, and add your bill calendar. Split your next inflow by the chosen percentages and move LKR 500 to your buffer. This is how stability grows—quietly, clearly, and with discipline.