What is the 50-30-20 rule in Kenya?


The 50-30-20 rule dictates that you spend 50% of your net income on necessities, 30% on miscellaneous expenses and 20 % on debts, savings and investments.

List of necessities

  1. School fee
  2. Transport
  3. Food
  4. Rent
  5. Shopping
  6. Electricity & water bills
  7. Sickness

List of miscellaneous expenses

  1. Car fuel
  2. Entertainment
  3. Airtime
  4. Donations/charity/tithes
  5. Paying house girl

List savings & investments

  1. To start a business
  2. To save in fixed deposit account
  3. To save in Unit Trust
  4. To buy land
  5. To contribute to a chama
  6. To buy shares
  7. Paying debts

If your net monthly salary is Ksh 100, 000, make sure that Ksh 50,000 goes to basic necessities, Ksh 30,000 goes to miscellaneous expenses and Ksh 20,000 to savings and investments—or payment of debts. If you save Ksh 20,000 monthly, in one year your bank account will have savings of Ksh 240, 000, which is enough to start a profitable business.

For those earning small salary like Ksh 20, 000, you will spend Ksh 3,000- Ksh 5,000 on rent, Ksh 5,000 on other basic necessities, Ksh 6,000 on miscellaneous expenses .You will save Ksh 2,000 to Ksh 4,000 only.

To ensure that the 50-30-20 rule remains unchanged, you should avoid destructive habits like taking of alcohol and having many girlfriends. The rule is applicable on someone who can strictly guard the principles.

For the 20% for savings, you should look for a good Sacco to buy shares and earn dividends annually. Assuming that you save Ksh 240,000 every year and for 4 years, the total savings is Ksh 1 million. You will be earning dividends of Ksh 150,000 every year.

You can also invest in Unit Trusts. For Ksh 1 million, you will earn Ksh 120,000 to Ksh 150,000 annually.

Another good investment is fixed deposit account. With Ksh 1 million, the money will generate interest of Ksh 100k and above yearly.

But the best thing you can do with the money is to start a profitable business. Save for two years, take a loan and start a business like hardware shop. With time, the hardware shop will boost your income. You will reach a time where you’ll be saving 100% of your salary.


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