If you’re looking for a simple way to manage your money, you might want to try the 50/20/30 budget. A popular way to budget that divides your income into three categories: needs, wants, and savings.
Here’s how it works:
Look at three months of salary slips and bank statements, then highlight all the items you paid for. Do a little research to find out the entry-level price of, for example, your cell phone and any other apps you pay for. If they have free versions and you are paying for them, that cost comes from your 3rd bucket, not your 1st bucket.
When looking at your payslip, remember to add back any pension payments made by your employer, as these all form part of your bucket two and add back your medical aid contributions.
- Bucket 1: 50% of your income goes to your needs. The basics that you can’t live without! Such as rent, utilities, groceries, insurance, and debt payments.
- Bucket 2: 20% of your income goes to your savings. The money you save for your future goals. Things like retirement, an emergency fund, or a down payment for a house.
- Bucket 3: 30% of your income goes to your wants. For those things that make life more enjoyable, such as dining out, entertainment, hobbies, and travel. Topping up your cell package, paid television apps.
The 50/20/30 budget is flexible and easy to follow. You don’t need to track every penny or use complicated spreadsheets. You allocate your income into these three buckets and stick to them. The main idea is to balance your spending and saving habits and live within your means.
I have a passion for making order out of chaotic numbers and papers. With 20 years experience, I have mastered getting those admin ducks to obey and stay in their rows.
