Trying to save money these days can sometimes feel impossible and when you do save it can feel like you have to give up everything nice; no eating out, socialising or buying that top that you fell in love with. But that does not have to be the case.
The 50/30/20 budget hack was first popularised by U.S. Senator Elizabeth Warren in her book “All Your Worth: The Ultimate Lifetime Money Plan” and it is currently making the rounds online once again.
The 50/30/20 budgeting rule involves splitting your income, after tax, into three different categories of spending; needs, wants and savings.
It has been tried and tested with many financial experts singing its praises. Whether you are looking to start budgeting, or you have been and it’s just not sustainable for you, here the 50/30/20 budgeting hack broken down for you.
@hermoneyempire The 50/30/20 budget rule is a great way to separate your paycheck if you struggle to keep ontop of your spending 💰 #fyp #greenscreen #budget #finance #entrepreneur #university ♬ Give Me Everything (Stripped Down) – Archer Marsh
– 50 per cent of your income, after taxes, goes towards needs. For example, rent, mortgage payments, groceries, utilities, healthcare, transport – needs and obligations that you need to survive.
– 30 per cent of your income, after taxes, then goes towards wants. This is for expenses that you would like to do or have, for example money spent on hobbies, entertainment such as going to the cinema or a concert, holidays, shopping, going out to eat or drink. This category of spending is also for lifestyle improvements such as spending a bit extra on one of your “needs” such as treating yourself to the latest iPhone or upgrading your car.
– The final 20 per cent of your income then goes towards savings – whether it is an emergency rainy day fund, a down payment for a mortgage or to go towards your pension. Debt repayment above minimums also fall under this category.
This budgeting hack provides a framework that is simple to understand, implement and sustain, making it less intimidating to cover all your costs while also saving. However, budget plans are not one size fits all.
Try and stick to 50/30/20 for a few months and if it does not suit you and your lifestyle, it is okay to tweak the percentages, especially depending on your financial goals.
Unexpected costs happen to all of us, it is part of life, so don’t worry too much if you didn’t save as much this month as you did last month.
Happy spending and saving!
Words by Sorcha Keane