If you are just starting with planning your finances, budgeting can be tricky, and you may find it difficult to manage all your expenses. There are a few plans you can use to help you budget easily, and a popular choice is the 50-30-20 budget rule.
This budgeting plan has you divide your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings. Here are ways in which to make the 50-30-20 budget work for you.
Know what you want to spend your money on
As you start your budgeting journey with the 50-30-20 budget plan, a crucial step you need to do is determine what you want to spend money on. Have a clear idea of what your income is going to. For example, when it comes to savings, know if you are saving it up to buy a car, a new home, or emergency funds.
For wants, understand what you want to spend on your leisure. Make sure to indicate what needs you should really pay for. This can help you have a big picture of where exactly your money is going.
Plan for your situation
While the 50-30-20 budget plan is a great starter for most people, it may not be most useful in every scenario which is why you should plan the budget for your situation. If you want the budget to work for you, tailor it to your circumstances.
If you have to spend more on needs, allocate more money towards that in the budget. If you are looking to save more money and can avoid spending on wants, increase the percentage for savings. You can adjust the rule accordingly to what you want and what your goals are.
Stick to essential wants
While 30% of your money goes to your wants, it is important to remember to limit your spending to the more essential wants. This means that you spend your 30% on wants that give you the greatest return on investment and satisfaction.
If your choice is between paying for a streaming service or going out for dinner, determine which choice will benefit you more in the long run. You can spend your money on things that make you happy but do so in a way that you will not end up regretting just a few days later.
Save money by getting good deals
50% of your after-tax income goes to paying for the most necessary needs and costs such as rent, transportation, and basic groceries. A way to save money is to look for better deals and providers for the necessities you need. In this way, you save money and still get to purchase your needs.
You can check out usave.co.uk for the best deals on basic utilities such as broadband, energy, and mobile plans. They will help you find the best deals for you to switch over so you can save money but still avail of quality services.
Keep track of your purchases and change accordingly
After you have started spending, keep track of your purchases to have a record of where your income is going. Do this to avoid going over-budget or spending money on unnecessarily expensive items or services. If you find yourself spending more money in a certain section, change your budget plan accordingly.
If a certain month requires you to spend more on needs, keep track of the change, and go about your plan as needed. It can be a hassle to keep track of everything your buying, but this can help you determine whether you are on-budget or spending too much money.