SO what is the 50/20/30 budget rule? Senator Elizabeth Warren, an American politician and former academic, popularised the budget rule in her book All Your Worth – The Ultimate Lifetime Money Plan. The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants, while allocating 20% to savings. Financial adviser and the managing director at Avinash Consultant and Actuaries, Sanjith Hanuman, provides the following tips to help you achieve this.
- If you are on a contract phone, switch to a prepaid plan.
- Try to shop once a month with a shoppinglist.
- Do a spring clean at home. What you don’t need, you can sell online.
- Try to do without satellite and streaming TV services. These are costly.
- Do a “no spend challenge” for a week. If it works, make it more frequent. The 30-day rule is a simple method to control impulse spending. Here’s how it works. Whenever you feel the urge to splurge, whether it’s for new shoes or a video-game, force yourself to stop. If you’re already holding the item, put it back.
- Make a monthly budget and stick to it – what are your wants and what are your needs?
- Shopping online is cheap. You can compare prices and have your purchases delivered.
- Avoid offer deals – buy two and get one free (the price is factored in for all three).
- Make online bookings for hotels, movies and travel. You save a lot more.
- Loyalty programmes – use your discounts rewards systems.
- Check your bank statements monthly. Sometimes you may be overcharged and other times you may be charged for things you did not buy.
- Join a lift club.
- Buy healthy meals – your medical aid rewards you.
- Gym regularly. Your medical aid and insurance company reward you with discounts on your premiums.
- Shop at back-to-school sales for your children.
- Entice your children to study hard, so they qualify for bursaries or scholarships.
- Buy used textbooks for school or university.
- Pay bills immediately to avoid interest charges.
- Save electricity by switching off appliances or switches.
- Subscribe to saving schemes.