The first step to take control of your finances is budgeting! Yes this is a basic but vital tool in order to get all your financial ducks in a row. How do you get your head around budgeting effectively?
There is a rule, called the 50-30-20 rule, which was created by US Senator Elizabeth Warren to help families control their finances.
This rule works by providing a guide to where your income should be going; 50% on needs, 30% on wants and 20% on saving for a future goal. Of course there are times when this rule doesn’t always work out, sometimes we might have to spend more on our needs and write off the wants and savings, or maybe we are saving very hard for a goal and we write off our wants in order to get to our goal faster. This is just a general guideline to help you budget.
The 50% into essentials should go to rent/mortgage, bills, food shopping, medicine, transport, loan repayments etc.
The 30% into wants includes clothes shopping, TV packages/subscription services, nights out, take aways, cinema, a weekend away etc.
The 20% savings can cover pension contributions, saving for a new car, saving for a holiday, a deposit for a new house. Paying loans off early is also a form of saving, so it can be counted under this heading for the sake of budgeting.
I know that sometimes you may look at your budget and think that there is absolutely no way you can afford to save. But really consider it, you must invest in your future. Can you do without your daily take away coffee? Those take away meals you get every weekend? Try and spread out your treats to yourself, instead of a take away every weekend, try once a month. Invest in your future. Your future self will thank you when you have a nice lump sum saved up for something important!
New year new you? Make taking control of your finances this year your New Years resolution. Do you want to start saving? Discuss your options with us, we can help you to get the best strategy in order to help you reach your financial goals.