The 28-15-20 % Rule That is Building My Financial Freedom
- Simon Wong
- Dec 26, 2025
- 6 min read
‘Think in percentages, not just numbers.’
This simple mindset can transform your entire approach to money, saving, spending, and growing wealth. When I look at life’s big money questions — how much house to buy, which car to finance, or how much to invest — using percentages gives me clarity, consistency, and control, even as my salary changes.
When I realized my financial plan was gaining traction, I fine-tuned the percentage proportions of my salary going into investments — a small shift that sped up my journey to wealth.
Of course, we all have slightly different life situations and financial set up, but if you are starting off, this framework is a very powerful tool as a guide. Once financial security is established, it can even be used further to set your investing focus on hyper-drive. Let’s break it down...
Why Percentages Matter
If you’re earning £30,000 now and spend £20,000 on a car, that’s a huge part of your income. If in the future, you earn £80,000 and spend the same £20,000, suddenly, the car costs far less of what you make. The price hasn’t changed, but the percentage of your income
going to the car has shrunk.
Think of percentages as a financial autopilot. For most people, their habits scale with their earnings — but only if you set them up that way. Yours don't have to follow that trend.
As Albert Einstein (allegedly) said, “Compound interest is the eighth wonder of the world.” It works best when you consistently invest a percentage, letting your actions compound as your salary grows.
Mortgage 🏘: The 28% Rule
Let’s talk about buying a home. How big of a mortgage should you get?
Answer: Not more than 28% of your gross salary.
This isn’t just some made-up rule. It’s used by financial experts and mortgage lenders as the sweet spot for staying comfortable, safe, and not house-poor.
For example, if you earn £40,000 per year, aim for mortgage payments (including insurance and fees) of no more than £933 per month — that’s 28% of your monthly income.
Want to stretch? Lenders may approve 4-4.5 times your annual salary for a mortgage. Some can even go up to 5 or 6 times, but don’t just look at the number. Focus on the percentage.
The magic is that if you stick to the 28% rule, as your earnings go up over years, your mortgage payment, if it stays fixed-ish (remember variable rates), becomes a smaller percentage of what you earn. That means more money in your pocket every month to save or spend how you like.
A Little Help From Inflation -
Furthermore, the monetary true value of your monthly mortgage payment at the end of your 20 year mortgage is not the same value as the amount you paid when you first started the mortgage due to the help of inflation!
As you get older and earn higher salaries, your mortgage payments becomes cheaper and cheaper through time, taking up less and less portion of your salary.
Car Finance 🚗: Keep It Under 10%-15%
Cars are temptations on wheels. Financing a shiny new one can eat up your earnings if you’re not careful.
Experts recommend your car payment (including insurance, taxes, and motoring costs) should be no more than 10-15% of your gross monthly salary.
If you take home £2,500 per month, keep your car costs below £250–£375.
I put my hands up, I am four-wheel fanatic. I love cars. Back in the day, I had a beautiful all black Mitubishi Lancer Evo Viii, a perfect rally classic. It gave me endless joy when I had it, but commuting to work with it, means filling up a tank every 3-4 days. Along with the car finance, it ate up nearly 35% of my monthly take home pay. That car felt less like freedom and more like a mobile prison. When fuel prices went up, I was eating beans for lunch.
Stick to the percentages. You’ll thank yourself later. Also, as I have mentioned many times before, you'll be very surprised how little people ACTUALLY care about what car you drive. We all have our own problems to think about.
Investing & Saving 📈: The 10-30% Golden Range
Some people save 10%. Some aim for 20%. For going part-time or retire early, I go for 30%. Either way, picking a fixed percentage and automating it is the easiest way to build wealth.
For example, if you make £3,000 per month and put away 15%, that's £450 per month saved/invested.
As your pay rises, so does the amount you invest, automatically — without you lifting a finger.
Some, like me, take this further saving or investing 30%+ for early retirement dreams (Financial Independence, Retire Early — FIRE).
Remember, investing your savings is only way to achieve early financial freedom and true control by yourself!
You’re not living for beans-and-toast. You’re giving your future self more choices, more financial power, more autonomy with your own time and life.
The Magic of Keeping Costs Steady
Here’s a classic social norm: as we earn more, we spend more, bumping our percentages up and up until every pay rise disappears like a dropped coin slipping through the gaps in a drain cover. ‘Lifestyle creep’ or should we say ‘Lifestyle inflation’ gets us all.
But real wealth starts when you break the script. What if you kept your housing and car costs steady, even when your pay doubles? You would automatically be saving more, investing more, and building true security.
If your salary doubles but your mortgage payment stays the same, you cut your mortgage percentage, of your take home pay, in half.
The same goes for your car and your spending.
That growing gap? That’s where wealth is born.
Ask yourself: When your pay rises, can you keep the cash outflows the same?
Practical Tips to Use Percentages
Calculate your mortgage, car, and investing costs as a % of your monthly income.
Recalculate every time you get a pay rise.
Keep living like you’re earning your old salary for a while — and see your savings soar.
Use pay rises, cash gifts or lump sum of money to bump up investing/saving, not just spending.
Every time I get some extra pay or a cash gift, I invest in my savings, my future self first. Any other purchases comes second. I am sure buying those things won't make that big of a difference to my future as my investments
Putting my investments on steroids
Over my last 3 incremental pay rises through my NHS registrar years, I worked very hard in not changing a single thing about our household spending:
🚗 I still drive the same red Skoda Octavia VRS I bought with cash in 2019. (More on that in a different blog) My wife still drives the same car on the same finance over last 5 years, now each monthly payment falls below 10% of my monthly salary.
🛩 We still go on the same type and number of travelling holidays a year with my wife and two boys.
🥡 We still rarely order takeaways
🚕 We rarely take taxis.
🌯 I still bring all my lunches to work.
🧥 I still wear the same coats that all fits me since before COVID more than 5 years ago.
👙 I still have quite a few clothing items I wear at home that I don’t need to replace just because they have a few holes in them.
Food for Thought
Are you spending more just because you’re earning more, or do you keep the fixed costs steady?
If you stopped ‘upgrading’ your life with every pay rise, how many future working years or months can you cut down?
“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffet.
Your future self will thank you for thinking in percentages, not just numbers. Let your investments grow with your income — but never your habits or outgoings!
Disclaimer
All content on this blog is provided for general financial education and entertainment purposes only and does not constitute financial, investment, tax, legal or any other professional advice. Nothing on this site takes into account your individual objectives, financial situation or needs, and you should not rely on it to make any financial decision.
You remain solely responsible for your own decisions and must do your own research, due diligence and independent learning before acting on any information mentioned or implied here. Examples, case studies and any numbers used are purely illustrative and cannot be guaranteed or replicated in your circumstances.
Investing and financial planning carry risks, and the value of any investment can go down as well as up. Before making any financial, investment or tax decisions, you should seek personalized advice from a suitably qualified, regulated professional adviser.
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