Whether you’re worried about work falling through or are feeling completely secure in your job, it’s never a bad time to get on top of your money. While we might all know that we should be saving for the future, that’s even harder in hard times. But there is one rule that will hopefully help you to get the hang of it…
Budgeting and the 50/30/20 rule
Budgeting may not be the most exciting task in the world but it’s the first rule of making your money go further. It’s simply a matter of adding up all the money you have coming in and the amount going out. You can do this on paper or a spreadsheet, and there are even free budgeting apps out there.
The idea of the 50/30/20 rule is to spend 50% of your income on essentials, 30% on optional items, and put 20% away for savings or paying off debts. Now granted, for a lot of us this simply isn’t possible, with more than 50% of what comes in being swallowed up by essentials. But the plan still serves as a helpful guideline at the sort of split you should be looking for.
Here’s how it works
- The other bit
First, you’ll need to work out the family’s take-home pay and halve it. That’s your first 50%. Then add up what you’re currently spending on essentials: mortgage, food, clothes, utility bills and so on. How does this compare to that first 50% figure?
According to the plan, 30% should go on ‘desirables’. Of course, at times that can seem like a bit of a pipe dream. But if you are able to set it aside on months with special occasions like birthdays, then that’s great. And remember, the ‘desirable pot’ isn’t just for others. You deserve the odd treat and luxury just as much as they do.
Finally the bit that no one likes – until they see the benefits: the 20% you’re putting away. Even if you can’t put away 20% each month, just setting aside what you can means you’ll soon build up for emergencies or those special occasions.
What are your top money saving tips?
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