Chances are that you are not really happy with the idea of a budget. Draw up rules for yourself in which you determine how much you can spend on what … That doesn’t sound very nice of course. But rationally you also know that a budget can just make sure that you can achieve bigger goals such as a nice trip, a child, a dream house or a new car. And that is fun.
Fortunately, drawing up a budget is a piece of cake and easier than you might think.
Use the 50/30/20 rule for your budget
Establishing your budget primarily feels like a daunting task, because you have to think about how much money you want to spend on each category. And speaking of categories… Which one should you adhere to for this? In short: a lot of thinking. This can be the barrier that prevents you from using a budget and saving more.
The solution is simple: use the 50/30/20 rule for your budget. A lot of people use that rule because it means you don’t have to think about the questions we asked above at all. But what does this 50/30/20 rule mean?
The numbers in this line represent percentages. With this budget you spend fifty percent of your income on ‘needs’. Things that you do have to pay, such as your rent or mortgage, taxes, insurance, groceries, your car and, for example, childcare.
Thirty percent goes to things that you don’t really need, but that you want to spend money on. You can think of eating out, clothing, hobbies and outings. And then you finally have the other twenty percent. You save this part of your income. Some of this goes to your emergency fund, for example, to pay off your student debt, your investment account and your savings goal (such as that owner-occupied home).
It’s that simple. Instead of calculating to the penny how much you want to spend on groceries, gifts and eating out, you just try to stick to the percentages as much as possible. That is why it is an ideal way of budgeting if you get the jitters at the word itself.
Example of the 50/30/20 rule
Imagine that you have a net income of 2,200 euros.
50 percent then goes to the ‘I have to spend this’ jar: € 1,100
30 percent goes to the ‘I want to spend this’ jar: € 660
20 percent goes to the ‘I want to save this’ pot: € 440
This way you save more than € 5,000 euros a year, while you have also just done nice things with your money.
Using your budget
You have now drawn up the budget. But what does using the 50/30/20 rule look like in practice? First of all, it is important to transfer the twenty percent of your income that you want to save to your piggy banks immediately after you have received your salary.
In addition, you will have to keep an eye on whether you are still within your budget during the month. You can do this in a number of ways: with a self-assembled Excel sheet, a budget planner that you found on Pinterest or via a budget app such as Grip.
Keeping an eye on your budget may not really sound like the best time to spend. So make a moment of it every week, with a freshly brewed cappuccino, a tasty cake, your favorite specialty beer, a scented candle or a playlist with tasty songs about money. Gold Digger from Kanye West, for example. Really make it a moment you can look forward to.
You will see that after a while you do not even need that nice beer or that nice playlist anymore and you will have enough of the feeling that you get from having your finances under control. No more money stress!
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