You’ve gotta have a budget!

11th June 2018

Personal finance is of massive interest to me and is something I feel like I’m finally getting to grips with it.

I used to fall into the two following statements:

  • No matter how much I earn, I never seem to have any money left over.
  • At the end of each year, I seem to be more and more in debt.

Both of these were true for me and probably millions of other people. I’ve always managed to command a reasonable salary for the work that I do, but often it felt like people who earned half of what I did seem financially better off than me.

It didn’t matter if I got a pay rise I always just lived to my means and then some!

This was until I started taking responsibility for my finances and started a budget. After that point, I could see my debts reducing rather than increasing year on year. The best thing I came across was the 50/30/20 rule. It’s been pretty well documented all over the internet, so much so that I can’t even remember where I came across it but it seems to link back to this book All Your Worth: The Ultimate Lifetime Money Plan.

The basics of it are as follows:

50% Maximum on Essential costs:

These are bills that you can’t get away from paying, for example, rent/mortgage, car payments, loans, food.

30% Maximum on lifestyle costs:

This is to give you balance and if for things like holidays, meals, gym memberships, nights out anything that isn’t essential living costs.

20% Minimum on Saving:

Pretty self-explanatory but this you should be saving at least 20% of your earnings.How do I make a budget?

The way I made my budget was with a simple excel spreadsheet which you can download here.

I entered in all my monthly outgoings on the “Regular Monthly Payments” tab which would include food, rent, car payment, internet bills, council tax e.t.c and I could also mark off whether these were Essential or Lifestyle costs. Then I would add in any “Annual Extras” on the appropriately named tab, and this would be things such as Christmas, birthdays and holidays, again I can mark these off as either Essential of Lifestyle costs. Lastly, I entered in my incoming money which would include things like salary, state benefits, payouts from savings e.t.c

Once you’ve entered as much as you can take a look at the summary tab which will tell you how much you’ve got coming in and how much is going out. The breakdown of Essential payments vs Lifestyle and then the percentage split between Essentials/Lifestyle and Savings. You can now start tweaking your budget to make sure you fit into the 50/30/20 rule.

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