A simple guide to budgeting

A simple guide to budgeting


Have you heard about the 50-30-20 Rule? It’s a simple practice, that could help to kick-start your savings. The rule breaks your monthly income into manageable amounts.

 

Here's how it works:

We said it was simple and it is. By breaking your monthly income into three different segments – Must Haves, Wants and Savings – you may start to think more about prioritising your outgoings and could start to see your savings grow. 

Must Haves

50% - Must Haves

Typically, ‘must haves’ are your unavoidable outgoings. These could include your mortgage, rent, credit cards, power bills, school fees, groceries, or insurance. 

Netflix subscriptions don’t count. Sorry. If something can be delayed for a while, then it’s probably not a ‘must have’. By deciding what is necessary and what’s not, could help to give you the power to make smart financial choices and prioritise your ‘wants’.

30% - Wants

Even when you are being responsible with your money, you may need to plan for spending some extra money each month. Clothes are not a must-have every month, but you will realistically need to purchase some over the course of a year.

Takeaways, new clothes, a personal phone plan, the aforementioned Netflix subscription – these things are ‘wants’ and can play an important part in your life. By keeping these expenses to just 30% of your outgoings could help to keep you on top of your finances. A good attitude to have is that ‘once you’ve spent it, it’s gone’ – so you’ll have to wait until your next pay check before spending on your ‘wants’ again.

Savings and Debt

20% - Savings and Debt

20% might not seem like a high proportion of your income, but over time your savings could really start to add up. The most important aspect of saving – like getting exercise – is building it into your life so it becomes a permanent habit. If you don’t have any debt, then great - the whole 20% could go straight into your savings. Whereas, if you’ve got debt and you’re finding it hard to pay it off, you can focus on repayments.

Everyone’s financial situation is different, but no matter the size of your pay check, if you can start saving on a regular basis then you could take the first steps towards achieving your financial goals.

The great part of a 50-30-20 budget is that it’s flexible and you can make it fit your life. So why not give it a try? It could put you on the right track towards saving for a home loan deposit, a holiday, a new car, or just for a rainy day.

Debt consolidation

If you have too many ‘must haves’ eating into your monthly payments you may want to consider consolidating your debts.

Debt consolidation is a type of loan refinancing that draws in multiple debts, like credit cards, phone bills, personal loans and car loans into just one loan account. This takes you from multiple payments to one monthly amount.

If you are thinking about getting budgets under control through debt consolidation then talk to one of our Lending Specialists on 13 73 77 today.

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