Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to divide up after-tax income and allocate it to spend:50% on needs,30% on wants, and socking away20% to savings.
Regardless of if you are living pay-check to pay-check or earning seven figure's a year, your budget is the foundation of your financial planning or wealth creation.
What are the benefits of budgeting:
Acts as a road map
Reveals waste
Aligns your priorities
Money becomes a tool and not a stress
Now that you are 100% convinced that budgeting is a must, you have popped off and updated your budget and have diarised a day each month to review your budget against your actual spend. It is possibly worth while to look at some tips when doing your budget.
I am a fan of the 50/30/20 Rule; however it is not always realistic immediately and could possibly be your first target to aim towards. It is also advisable when analysing your budget to group your monthly spend into the categories of: Needs, Wants and Savings
The first step in sticking to your budget or even before monitoring it, is to set up a system where you can easily track your funds, ideally electronically. I have just started using 22Seven which is an Old Mutual app. It is fairly daunting as you need to put in your banking details but it is all very secure. I managed to set up my budget and it automatically pulled through all my transaction. The set up process (if done correctly) does take a while HOWEVER, it does highlight your random/ useless spending.
Once you have analysed your dreadful spending habits, add up what you don't feel are "NEEDS" or "MUST WANTS" add an automatic payment to a savings account; Ideally the Investec Money Call Account offered by PWH Wealth Group. Two reasons for this are:
1. The funds go off your account before you can spend them
2. As you need to email PWH Wealth Group to access the funds, you will always think twice before you spend that money.
The next action point is IMPORTANT: Allocate a goal to these funds ie Your December Holiday, that new couch you've been wanting to buy, a down payment on a house.
These funds can also be allocated to "Emergency Funds" ie The new tyres for the car
The last consideration is to Get Your Priorities Straight, what is more important, that weekly take out order or the weekend get away with your family or friends?
Happy budgeting!
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