There is so much talk about budgeting and the importance of it, but aside from a few vague descriptions, there is rarely any indication in terms of how to actually go about it. In an effort to help you become a true budget master, here is everything that you need to know about the infamous 50/20/30 rule, as well as a step by step explanation of how to put it into practice.
What is the 50/20/30 Budgeting Rule?
In essence, this budgeting rule refers to how best to split your monthly income in order to maximise your money and stretch it further.
Fifty percent (50%) of your income is the amount that should be used in order to pay for necessities. Necessities are things like rent, food and your varsity fees.
The 20 refers to 20% and is the amount that should be put away into a savings account or used to settle any debt that you may have accumulated.
The final 30% is the amount that can be used to pay for your wants / lifestyle choices. This may include buying new clothes, entertainment, gym fees and money for booze.
Right, so say you’re lucky enough to bring in an amount of R8 000 each month. Whether this income comes from your parents, a part time job or rental it should all be treated the same. According to the 50/20/30 rule, you would set aside R4 000 to pay for your necessities, you would save R1 600 and you would then have R2 400 of disposable income leftover to spend as you wish.
Is it Fool-Proof?
No. There is no ‘one size fits all’ when it comes to student budgeting. However, the 50/20/30 rule is definitely a good place to start, especially if you’re unsure of how effective and appropriate your current spending habits are. Remember – if you are in debt or you are saving up for a specific goal, you may want to swap the savings percentage with the lifestyle choices percentage for a period of time. The rule would then be 50/30/20.
Here’s to better financial planning and fewer sleepless nights!
Calling all successful, dedicated budgeters! Please be sure to share any other helpful budget tips with us and your fellow students using our Facebook page as a platform.