When it comes to budgeting your money, it can be confusing to know where to start. How much should you be spending – and what should you be spending on? How much is ‘normal’ to spend on everything in your life, from your rent or mortgage, your car, entertainment and eating out?
If you have no idea where to start, or would just like to refresh your money mindset and give your budget a makeover, here’s a super simple budgeting rule: the 50/30/20 rule.
If you have a 50/30/20 budget, that means that:
50% of your net income goes towards needs;
30% of your net income goes towards wants; and
20% of your net income goes towards your financial goals, like paying off debt or buffing up your savings.
Let’s say that I bring home $1500 every fortnight. Ideally, my budget would look like this:
$750 (50%) for my needs;
$450 (30%) for my wants; and
$300 (20%) for my financial goals
So what does this mean? Because 50% goes towards needs and 30% goes towards wants, that means that 80% of your budget is allocated, leaving you with 20% to grow in your personal finance goals. Of course, if you can increase that 20% to 30%, 40% or more, even better! In an ideal world, right?
What it means for you is that you need to learn to live on 80% of your income. Here’s how I did it, and you can too!