Coming up to tax time I have taken a bit of time aside to re evaluate my financial budget. Doing some research on the 50/30/20 budget. We have always done alright with budgeting and haven’t really ever had a problem with it. But that doesn’t mean it can’t be improved. For the next few months I am going to trial this 50/30/20 budget. Recording comparisons of our previous budgeting style compared to this new strategy/style.
What is the 50/30/20 Budget?
Originally the budget is set out as follows:
We are going to tweak it a bit
Since beginning our frugal journey together we have put more priority into savings and decreased the amount of ‘wants’ per say we chase. So, I am going to alter the budget a tiny bit to the following:
The categories will be broken down into this:
Basically, Every expense we have that is mandatory to our lifestyle. Including minimum repayments on our mortgage as well as personal loans.
Plus other recurring necessary bills such as- Groceries, our pups food, Electricity, Wifi, Council rates, Transportation.
The basics of everyday life really. In other words, the boring stuff.
This portion I consider the most important in progressing towards our goal of financial independence.
Savings include our regular contributions to our investment portfolio, emergency fund contributions as well as extra contributions paying down debt. Paying down debt is taking priority, followed by adding to our investment portfolio.
As we have our emergency fund already established, this will only need to be paid into should an ‘emergency’ arise.
Anything and everything that isn’t considered necessary to us will fall into this category. Eating out (which we are trying to minimize as it is), Holiday savings, Entertainment, clothing and accessories, things for around our home and a schooner here and there.
Gym. I recently did a whole post of how I was cancelling the gym membership last month. That has changed for the time being as our gym has opened free to members for the month of July. after which i will be funding my gym membership with a side hustle outside of my regular income. (Full blog post to follow next week!)
Doing some research most people put their streaming services in this category as well. However , for us we avoid this cost all together because we are sharing accounts with family members who lovingly allow us to hitch a ride on their netflix account for free! Shoutout to the cuzzies !
So, where to from here?
Budgeting is a key to financial independence. I don’t see any way around that. We’re actually excited, trialling the 50/30/20 strategy and have high hopes for the coming months. As a regular rule we don’t hold money in high regard to determining happiness. But it will make life easier having it managed more efficiently.
Improvements can always be made in any aspect of financial literacy. Since reading the book -Rich Dad Poor Dad last week. One of the points I took away from it was to invest meticulously into assets. This is the reason why we’ve chosen to switch the 30% and 20% around. I don’t need 30% of my income spent on wants. I need 30% of it invested into paying down debts, savings and investments (assets).
In a few months we will revisit the topic and do a thorough analysis of how we went and whether we decide to continue with the 50/30/20 budget strategy!