How to create a practical budget you can use
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How to create a practical budget you can use
A budget is a financial plan you can use to better organize and manage your money by calculating your income and expenses. Budgeting can be as easy or complex as you want to make it. The hardest part is always sticking to it.
But whether you're new to budgeting or simply looking for a method that works for you, the 50-30-20 budget rule works for nearly everyone no matter what their income, and it's easy to follow! We'll go over how to budget using the 50-30-20 rule, plus give you examples.
What is the 50-30-20 rule?
Many experts agree that one simple way to budget is to divide your income into three parts: your needs, your wants, and your savings. One way to do this effectively is by using the 50-30-20 rule.
This method is super easy to follow! Simply calculate your monthly income (or bi-monthly if you prefer) and divide it three ways:
50% goes towards your needs, such as housing costs, utility bills, groceries, loans, and any other mandatory expenses.
30% goes towards your personal wants, such dining out, entertainment, traveling, streaming services, and other subscriptions.
20% goes to your savings, whether it's a savings account, retirement fund, or other investments.
After you determine how much money goes towards each category, you can track your spending throughout the month. If there's any extra money left over, you can roll it over to the next month, or just put the rest into more savings!
Monthly budget example
Ok, so let's say you get paid approximately N100,000 a month. Now split that three ways according to the 50-30-20 rule.
50% of 100k is 50k.
30% is 30k.
20% is 20k.
If 50% does not cover your living expenses, which is unfortunately the case for many people, then you can take some from your “wants” money, or even your savings, if necessary.
The main point of this rule is that it should be flexible depending on your needs and encourage you to save at least a little something every month. It also helps you to visualize how your money is being spent and sets a limit for the amount of money that goes to the extra expenses that may or may not be necessary.
It's time to start budgeting!
Now, all that's left to do is try creating a budget of your own! The most important thing to remember is make sure to make your budget work for you. Follow the 50-30-20 rule for starters, but then adjust every month based on your needs. Just don't forget to try and save 20% or more for savings. That way you'll have some money set aside in case of an emergency.
From: majority.com
