I was sort of helping my bf with regards to some kind of spending tracking or budgeting ideas. Then I came across this 50 30 20 rule. I mean I came across this before, but kinda brushed it off since I did not think it applies for me. i.e part of the 50%, which is the necessities are debt like student loan and mortgage, and since I did not have either one of those, yet, I thought I could not use it. But then I decided to try it out anyway. Like this;
If for example, salary is $1,500, 50% of it should go to necessities. For me necessities are Rent, Utilities, Health Insurance, Cellphone. I think this is quite common in most single household. However all those does not add up to 50%, so I added a line ‘Down Payment’ to capture the balance of 50%. In this case the ‘down payment’ amount is $85.
Then next is Savings. Savings are pretty straight forward. 20% of whatever you are making. You can however divide the savings itself further into different categories. i.e Emergency Fund, Retirement, etc, etc.
Lastly, Lifestyle. This might vary between peoples, but once you have set the ‘limit’ and chose items that you most frequently do, then all you have to do is stick to it. I have a gym membership which I’d like to maintain. I have been wanting to improve my wardrobe. My only social spending usually go to eating out with friends and whatnot. And as a woman, I always need that miscellaneous items, at least for one of those monthly thing, if you know what I mean.
Another distinction here is the category for ‘Travel’. My travel plans, at least one for 2014, is a big trip, and it will cost a lot. So I have to save for it somehow, and in this case it’s $50.
Now, if you look closely, yes, I have set my savings at 20%, but at the same time I have this ‘savings’ of $85 (down payment item) from my necessities category, and another $50 ‘saving’ (travel item) from the ‘lifestyle’ category. That brought up my total savings to almost 30%.
Once you have all of these category and budget sets, you only need to track the remaining items like clothing, entertainment, dine out, and miscellaneous items.
Try to do the tracking every week or every 2 weeks. That way you can keep track of how much money you’re ‘allowed’ to spend. At the end of the cycle (paycheck cycle), if you spent every single cents that’s available from this category, you don’t have to feel bad, cause you have savings, and you do save, at least 30% of your income. If you don’t spend everything, even better!, you can add those remaining balance into your additional savings.
These are what I have to track, for myself.
My tracking will start tomorrow. Felt a little bit like cheating, since I have not updated my spending tracking since November 2013. But in my defense, I was away on holiday, and then December came. You know how December is.