Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like,” Will Rogers, a late American actor and social commentator once said. While social pressures are inevitable, if you allocate your spending according to the 50/30/20 budgeting rule, you’ll find yourself not only covering essential costs but also using your money for the things that truly bring you joy.
Whether it’s the latest mommy car, a week at that spa that you “absolutely have to try” or a wardrobe of branded sportswear to fit in with the gym bunnies, many of us are guilty of shelling out excessive amounts just to maintain our social standing. But if you find yourself frequently regretting your purchases and battling to make it through the month, it’s time to reassess how you’re dividing your income. It’s time to consider the 50/30/20 rule.
A rule worth sticking to
As independent women, we know that in many instances, it’s in breaking the rules that we really thrive. This is not one of those cases. The reason the 50/30/20 budgeting rule is so often recommended, is because it actually works. That’s not to say we need to be pedantic about it, but using this method as a general budgeting guideline, can ensure you approach your finances with a plan in place. Separating your money into needs, wants and savings, it helps you to keep the big picture in mind.
So how exactly should we divvy up our after-tax monthly income?
50% allocated to needs
These are all those monthly expenses that you cannot escape, from rent or bond repayments to electricity to groceries to school fees to medical aid. Until these expenses are covered, you cannot leapfrog to the next category, so best you know what you’re in for each month.
30% allocated to YOUR wants
It’s not about keeping up with the Khumalos, it’s about being honest about what you really want. From some healing retail therapy to lunch with the girls to a spontaneous weekend getaway, this amount is for the spoils that get you through the day, week or month. They may seem vital but they’re the first category you’ll need to reduce if unexpected needs crop up.
20% allocated to savings
If you don’t set aside money each month to save for emergencies, life goals or to cover debts, you’re setting yourself up for financial strife. Whether it’s an easy access savings fund, or a long-term investment, ensure you’re making the most of your money and thinking ahead. Your future self will thank you.
