Despite inflation falling to 3.9% in the year ending in November (from 4.9%), the cost of living still places extra strain on household budgets. Even if prices are starting to decline, regular products are still more expensive than they were before the pandemic. Nevertheless, if you adhere to the “50/30/20 rule,” you may quickly gain control over your finances and how you spend your money.

Here’s a step-by-step guide to help you determine if using this budgeting strategy could benefit your financial path. It provides a fast and dependable way to get your finances back on track.

The 50/30/20 method involves putting aside:

• 50% for essential spending such as bills and food shopping

• 30% for non-essentials such as eating out and style and beauty

• 20% – into savings

1. 50% of Essential Spending (NEEDS)

Allocate fifty percent of your earnings towards necessities like rent, groceries, and energy expenses.

Planning fun events all year long, such holidays, festivals, and get-togethers with loved ones, may be tempting, but before you do, you should think about your essential spending, any debt you may have, and your savings objectives.

Taking care of those necessities gives you a better idea of how much money they have left over for savings and discretionary spending. For some people, the necessities are eating up more than half of their income.

In these situations, it’s usually worthwhile to look for any wasteful spending that may be reduced. For instance, do you currently use your streaming service or gym membership enough to make them worthwhile? If not, think about suspending or terminating your membership or subscription until you need it once more.

Verifying if you are paying more for necessities than is necessary is also helpful. Consumers should review their phone contracts; if they haven’t updated and they are past the first contract period, they may be able to receive a bill decrease. Additionally, you can compare prices from other providers for services like broadband or house and auto insurance.

2. 30% For the Fun Stuff

Invest thirty percent of your income on enjoyable activities such as eating out, shopping, and takeaway.

It’s probably not hard to know what to buy, but it can be difficult to decide which social events to prioritise in order to stretch your money farther.

Try to develop the habit of being honest with friends and family about your financial situation. Establish limits, know when to refuse requests, and don’t feel guilty if you do so.

“It will pay to prioritise the things you truly want to undertake in order to help stay on track with budgeting and meet their savings objectives. Fear of missing out (FOMO) can be a huge element to overcome when it comes to plans.”

3. 20% For Savings and Investing

Set aside 20% of your income for debt repayment, savings, long-term objectives, and an emergency fund.

The remaining budgeted amount is set aside for savings. Whether you’re saving for a specific purpose or creating a safety net for unforeseen expenses down the road, consistent saving is crucial. A little monthly savings goes a long way.

“The ideal amount according to the method is to aim to put 20% of your income each month into a separate savings account,”. Since not everyone has the resources to do this, they should determine how much they can afford to save on a regular basis.

Remember that Keeping things simple is still a good method to manage your money.