It can be difficult to balance your lifestyle. One budget, known as the ‘50 / 30 / 20’ budget can help you balance your savings with your lifestyle.
If you like structure, but not too much then the 50/30/20 budget is perfect for you.
You may have debts to conquer and savings goals to achieve, but we all know that life gets in the way.
This is because you also have needs, wants that need to first, and you shouldn’t have to sacrifice them to save money or pay off debt.
With this rule of thumb, you can balance the books whilst maintaining a healthy lifestyle. This approach can help you build a positive financial and lifestyle model for the future.
How To Budget Using The 50 30 20 Rule:
The 50/30/20 rule is a popular budgeting method that splits your monthly income between three main categories. Here’s how it breaks down:
50% of your income: needs.
Necessities are the expenses you can’t avoid. This portion of your budget should cover costs such as:
- Housing
- Food
- Transportation
- Basic utilities (e.g. Gas & Electric)
- Home and/or Car Insurance.
- Child care or other child-oriented costs
- Healthcare
30% of your income: wants.
Generally speaking, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:
- Monthly subscriptions (e.g. Netflix)
- Travel
- Entertainment
- Meals out
- Retail
Distinguishing between needs and wants isn’t always easy and can vary from one person to another. You might feel that your food shop seems like it should be in your wants.
For example, you might feel like the chocolate or strawberries you buy at the supermarket aren’t essential. You wouldn’t die if you didn’t go without chocolate.
You might be able to get by on a £50 a week budget, but you spend £100, so there is definitely a grey area.
However, I feel like good food and healthy eating is essential and has a huge impact on my overall wellbeing, so it stays in the needs bucket.
Being healthy can have an astonishing and long-lasting impact on your finances. It can:
If I want to save money on my food bill, I resort to 7 specific supermarket psychology hacks.
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20% of your income: savings and debt.
Crunch time. You need a financial cushion to avoid debt. You need to save and prepare for your future.
This 20% will allow you to do all that. However, if you have high-interest debt you will most likely want to pay that off first.
Once you have your emergency fund (mine is 6x my monthly expenditure), you can then think about investing and starting to build passive income.
Saving 20% of your income might seem outrageous. However, there are some simple strategies that can make it seem effortless, such as paying yourself first.
However, this is just one of 12 money saving habits that you should master
Alternative Budgets To The 50 30 20 Rule.
It’s important to build financial structures and systems that work for you and suit your personality.
However, if you don’t want to budget using the 50 30 20 rule then there are other methods you can use.
This budget is not for everyone and you might want some stricture or more relaxed depending on your personality. So read about 4 other budgetsthat might work for you, or alternatively take my quick quiz:
There are also 8 great budgeting tips I can give you, but it all starts with getting started with the right budget for you, so choose wisely.
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