It’s hard to spend money and not walk out the stores, groceries in hand or not holding that new console within 2 weeks after rushing for the pre-order or not even having a date on when the service will be done on the kitchen renovation. We want to see that instant return on the money just spent. I give you money, you give me something I can use… right now!! Check out our store for such vices, hehe.
But building wealth takes a different route and sorry to break it to ya, but it’s the long way. The anxiety-rising way. The ‘spend money now and can only hope to see it return even if it has no profit attached’ way. And with that ‘Jesus-is-coming-soon kinda’ hope.
But not to worry, hope is seen when knowledge is exercise.
One of the methods used to help with personal budgeting is the 50/30/20 rule. With over 20 years of research Elizabeth Warren and Ameilia Warren Tyagi’s book, “All Your Worth: The Ultimate Lifetime Money Plan” shows a way to simplify getting out of debt. They highlight the spending habits of the average person and how the individual can handle money better. 50/30/20 are three categories of spend; 50% is for needs, 30% are wants and 20% for savings.
Needs could come down to subsistence. This is the bare minimum one needs to ensure survival. But if there’s no need to live frugally (essentially to enhance the savings pot) then one can make more room for the food budget. My favourite budget.
Wants are your desires, the things you seek to enjoy, it may be experiencing a luxury lifestyle or holding a subscription to a football club to see the home games. Regardless, these are negotiable items, the ones where you can cut back on if survival is a must.
And savings are, you know, savings.
Assuming you’re averaging an income of £1,700 per month, by simply applying the 50/30/20 method you can easily have an idea as to where your money should be going. My favourite part is quickly identifying how much I could be saving. For example, 20% of £1,700 is £340 and over £4,000 in the year.
Give it a go and see how it works for you and let us know what other methods you have found worked for you?
