Today I am going to share how the 50/20/30 budget method works and tell you how it can change your financial future forever.
I’ve recently been trying a new budgeting method which a few people I know recommended to me – it’s called 50/20/30 and I find that it’s an amazingly easy way to learn how to save and be financially savvy. It’s not for everyone and I get that, there are lots of us who don’t have the luxury of allocating funds to our financial goals and to unnecessary spending but for those who can, I definitely think it’s worth a go to see if it suits your budgeting style more than your current method.
What is the 50/20/30 Budget Method?
There are some variations to this method but the rule of thumb when using the 50/20/30 budgeting plan. This is the breakdown of what 50/20/30 means:
- 50 percent of your income will go towards necessities.
- 20 percent of your income will go towards financial goals, like paying off debt.
- 30 percent of your income will go towards wants like dining out or buying clothes.
When you get paid, you allocate your money to these three different ‘pots’ and the rest of the month is sorted – your bills are covered, you’ve paid towards your current financial goal and know how much you have for the fun stuff.
Who will this help?
The 50/20/30 budget method is fabulous for anyone who struggles with setting a budget. This method helps to assign your income without having to think twice because you’re already set up with the percent of income that needs to go to a specific category. I personally love that this method allows for spending on the things I want rather than just the things I need. When you can spend money on items you desire or events you want to attend, you’re more apt to be successful in saving money – which is something called intentional spending.
Why does this work for me?
Often times I get distracted by the shiny things in life. I may see a course or an item at a local thrift store that seems inexpensive, but obviously, these items add up quite quickly and I’ll realise that I’ve nearly spent my budget. When I use the 50/20/30 method, I’ve already set aside my income and the only funds I have on hand in cash or card, are those that I can spend on those whimsical purchases I like so much!
This is the best method for someone who really doesn’t want to dig deep into their financials and create spreadsheets to work off of. I love that the 50/20/30 method is simple, easy to implement and keeps me motivated because I can still spend money on items I want but don’t necessarily need.
For me personally, I know the exact amount that I want to transfer into my savings account each and every month which means that I can set this amount up to leave my bank account automatically on the same day that I get paid. I don’t miss it at all that way which makes it easier to save. You might want to use your 20% towards other financial goals like repaying any outstanding debt, overpaying your mortgage or even popping the money in an ISA – all of which are sensible options if you ask me. I plan to open an ISA account for myself this coming year because, last month, I hit my forties and that plus losing my Dad recently has made me realise how important it is to be financially secure.
So, in conclusion, if you’re looking for a great way to stay frugal while paying off those bills, then I highly recommend that you try the 50/20/30 method.
You won’t regret, just try it and see. 😉
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