If you are looking at ways of better managing your money, putting together a solid budget is the best place to start. However, it can be difficult to know where to start and just how much you should be spending on certain things.
While putting some money away for the future is always a great thing to do, it is also important that you make sure your budget contains enough flexibility to allow you to enjoy the occasional treat such as a meal out or a trip to the cinema, or else a small daily indulgence such as a morning coffee on your journey into work. A budget which is overly strict could be too difficult to maintain in the long-term and could see you in a worse financial position than when you started.
This is where using a budget model such as the 50-30-20 plan may come in useful. The basic premise behind this method is that you divide your monthly income into three main areas: essential spending, discretionary spending, and savings. Whether your income is generated through employment, self-employment, or is topped up by benefits, this plan can still be used.
Let’s take a closer look at how the 50-30-20 rule works:
Of course these figures are based on an ideal scenario, and as we all know, life is rarely that straightforward. Feel free to tweak the ratios slightly if you feel they fit your lifestyle and income better e.g. if you live alone in a major city centre, your housing costs are likely to take up a greater portion of your income than someone sharing accommodation on the outskirts of town. However, if you can stick to them as closely as possible you can ensure that not only will you be able to meet your essential living costs and be able to enjoy the occasional treat, you will also be putting away some money which will soon build into a nice little nest egg for your future.
The great thing about this type of budget is that it is scalable, meaning it can work for anyone regardless of the income they receive. This is because rather than committing to saving a certain fixed amount, say £50 a month, you are instead looking at saving a percentage of what you earn, which is much more accessible particularly for those on lower, or fluctuating, incomes.
If you are struggling under a huge amount of debt, a budget such as this may not be suitable. Depending on the interest rates attached to your outstanding borrowings, you may well find it more financially sensible to channel any spare money to paying off your debts rather than allowing yourself a 30 per cent allowance for entertainment and luxuries. If you are experiencing debt problems, the best thing you can do is to seek the advice of a personal debt specialist who will be able to guide you towards a solution. This may involve tweaking your budget, or alternatively you may need to consider a formal debt solution such as a Trust Deed or a Debt Arrangement Scheme.
For expert debt advice from a Scotland-based team, call Scotland Debt Solutions today on 0800 063 9250 to take the first step towards a debt-free future.
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