Today, I feel like talking about money. It wouldn’t normally be my topic of choice for this blog, because I find this topic to be quite personal and individual to every one of us. Yet, I have always found fascinating the idea of creating a budget, finding new ways to save money, to invest or simply to find goals in life and work towards them…financially speaking.
First of all, I grew up in a post-soviet country, where budgeting wasn’t even a thing. People lived on their salary from month to month, borrowed money to buy bulkier objects, worked to return that money, and rarely was there a family that had enough money to save in a bank account. On certain occasions, when I had the privilege to receive money as a present, instead of the usual T-Shirt-and-pants gift, I would save that money in an envelope, hidden in my school supplies drawer. I would watch movies and see things that I liked and I would find ways to save enough money to buy myself the desired object. As a recollection, when I was in 6th grade, I desperately wanted a bracelet that had a ring attached to it. I had the money to buy it, but I couldn’t find it anywhere. I made my parents drive me hundreds of kilometres to other cities to find that bracelet. I asked relatives going abroad to look for one. I went above and beyond to get hold of that bracelet. Until one year later, on my birthday, I spotted this wonder of a bracelet on a stand, at the market! My dream came true!
My saving habits never disappeared. When I was studying at the university, I came across an amazing article that changed the entire money game for me at the time. It was the “50/30/20 Budgeting Rule” in Cosmopolitan USA! I was working then a part-time job that paid little money, and I was longing for some useful tips on saving. I adapted the ratio to my income and current expenditures, and it never failed me since.
So what is the 50/30/20 budgeting method? Most of you already know about it, I suppose, but I want to emphasize that this rule is the best starting point for anybody, be that a beginner in budgeting, someone who lost his job and wants to adjust to his current income, a person with a low or average income who wants to save for a house or a new car or a vacation, someone who wants to go back to school, and just anybody who loses track of money sometimes and needs a concrete financial direction.
The rule goes as follows:
- 50% of your income goes to essentials, or necessities, such as apartment rent and bills. I also call it fixed expenditures.
- 30% goes to your wants, like eating out, buying a piece of clothing, or anything that you want but is not necessarily a requirement; as well as to any fluctuating payments, like car credit, or gas. I call it variables.
- Aaaaand, 20% goes to your financial goals, otherwise said – to your savings account!
Here are 3 sources that can help you for starters:
Now, do not fixate on the percentage itself, but rather on your income ratio to expenditures. Every country has different pricing and income standards, so the key is to identify your needs and wants, and adjust the budget accordingly. Be very diligent when planning your monthly budget, be realistic about your needs and wants, and ALWAYS prioritize your goals.
It doesn’t matter if 20% or 15%, or 5% go into your savings account. What’s important is that you don’t skip this step and spend the money on a splurge, but rather keep your future goals in mind.
Again, play around with the rule described above and do an audit of your budget every 6 months.
To keep your money under control, you may find useful writing all down in an electronic budgeting template (there are plenty available online), mobile applications, like Mint, You Need A Budget, PocketGuard, Wally, Mvelopes, GoodBudget, etc. Also, many banks provide budgeting services in online banking, which are free, help you lever your money and keep track of your spending habits.
Nowadays, my husband and I revise our family’s budget every so often, do some adjustments, inclusions or exclusions, calculate the budget again, and set it off from the following month. Thanks to this wonderful method, we were able to save money to immigrate to Canada (which is a very costly process!), to rent a flat, to buy stuff for the house and have a child brought into the world. Now, that we have a stable income, we’re so much more aware and grateful for what we have achieved, and of what is yet to come.
So, my dear reader, put your financial reigning crown on, and keep on budgeting!