If you’re struggling to save money the ’50/30/20′ rule could help you budget
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Everyone’s
financial situation
is different, meaning everyone’s
saving
goals will be different.
Some individuals might opt for sending periodic installments
into an ISA
Each month, some might take a more spontaneous approach based on their financial situation.
If your objective is to save a larger portion of your salary each month, yet you’re uncertain about how to begin, here’s what you can do:
50/30/20 rule
is for you.
This is a tried, tested and proven technique that allows you to start regularly saving each month.
Let’s take a more detailed look at how this functions…
What does the 50/30/20 guideline entail?
The 50/30/20 rule helps keep spending on non-essentials within an allocated budget each month.
Essentially, the rule involves dividing your spending into three categories: needs, wants and savings.
Then, with each paycheck, allocate 50% to needs, 30% for wants and 20% for savings or debt repayments.
The 50/30/20 rule explained:
Needs – 50% of total salary
Needs include essential living costs such as rent or mortgage payments, bills, food and transport to and from work or the school run.
Desires – 30% of overall income
Desires encompass non-essential expenses like purchasing clothes or gadgets, dining at restaurants, fitness club fees, subscription services, vacations, and evenings out.
Savings or debt payments – 20% of gross income
The last 20% of your savings ought to be directed toward either surpassing the minimum payments on debts or contributing to a savings account, investments, or a pension plan.
Source:
HSBC
For example, if your monthly income is £1,500 after tax, you might spend approximately £750 on needs, £450 on wants and £300 on savings or debt repayment.
Dividing your funds into separate categories is a reliable method for budgeting.
Ed Fleming serves as the managing director at
Savoo
, a voucher code provider that donates to
charity
With each voucher redeemed, he remarks: “Once a large amount lands in your account, it’s simple to lose control.”
‘Simply allocating funds directly into separate accounts or holding back what’s needed for monthly rent and expenses makes it considerably simpler to track your available spending money.’
‘Around midway through the month, it becomes simpler to gauge how much you have left for the following weeks to indulge in activities such as dining out, excursions, and hobbies.’
‘You can subsequently utilize tools such as discount code websites, comparison sites, and clearance offers to lower costs and make your budget stretch farther.’
What if the 50/30/20 rule isn’t suitable for my needs?
Money management is highly individualistic, which means that budgeting guidelines can never be a universal solution for everyone.
For certain individuals, half of their salary might not suffice for covering basic expenses, whereas thirty percent could exceed what they usually allocate for non-essentials such as gym memberships.
subscriptions
.
If this applies, consider dividing your funds according to your particular expenses. It could be closer to ratios such as 60/20/20 or perhaps even 70/20/10.
In either case, this approach helps guarantee you won’t overspend on unnecessary items, particularly when you’re aiming to save money.