No matter what your financial goals are, a budget can help to make them happen. From managing your day-to-day spending to setting yourself up for the future, it pays to manage your money. Budgeting doesn’t need to be spreadsheets and formulas and calculators, so here’s a simple way to better budgeting:
A great place to starts is the 50/30/20 budget rule. This is an easy guide to show the percentage of your salary you should be spending or saving. With this rule you allocate:
To show you how it works, let’s use two individuals, one receiving an after-tax income of $52,000 p.a. and the other receiving an after-tax income of $104,000 p.a. with the 50/30/20 budget calculator:
Allocation |
Expenditure (rounded to the nearest dollar) |
|||
What |
Weekly |
Fortnightly |
Monthly* |
Annually |
50% Needs |
$500 |
$1,000 |
$2,167 |
$26,000 |
30% Wants |
$300 |
$600 |
$1,300 |
$15,600 |
20% Savings |
$200 |
$400 |
$867 |
$10,400 |
TOTAL |
$1,000 |
$2,000 |
$4,334 |
$52,000 |
Allocation |
Expenditure (rounded to the nearest dollar) |
|||
What |
Weekly |
Fortnightly |
Monthly* |
Annually |
50% Needs |
$1,000 |
$2,000 |
$4,333 |
$52,000 |
30% Wants |
$600 |
$1,200 |
$2,600 |
$31,200 |
20% Savings |
$400 |
$800 |
$1,733 |
$20,800 |
TOTAL |
$2,000 |
$4,000 |
$8,667 |
$104,000 |
Please note: As there are 52 weeks in a year, not 48 (i.e. four weeks x 12 months), the monthly expenditure has been calculated by multiplying the weekly expenditure by 4.334 (52 weeks / 12 months).
So you can see how much is allocated to each category, and how savings can grow over a year.
There are lots of benefits to creating a budget, such as:
However, there may be some occasions where you can adjust the percentages to fit your circumstances.
For those with high incomes, a 50% and 30% allocation towards need and wants may be too high, encouraging some extra spending. So tweaking the savings percentage could enable you to live comfortably, and reach savings goals even sooner.
For those who live in expensive areas, or with slightly lower incomes, it may prove difficult to only spend 50% of your salary on rent and outgoings. You may need to pinch the percentages for wants or savings to enable a good lifestyle. This is about understanding the balance, and introducing some budget planning into your banking routine.
A simple look at budgeting like the 50/30/20 rule is a great place to start effectively managing your money. Once you’re in a routine and looking to broaden your goals such as building wealth or investing, it may help to seek professional advice on your financial situation to achieve your financial goals and objectives with a budget sheet.
Remember, as your financial position changes, so should your budgeting. So keep learning and adapting and you’ll see financial success in no time.
We can help with setting up a budget. Contact P&N for a financial health check, or talk to P&N Financial Planning to start to build a financial plan for your future.
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