Master Your Finances: A Beginner's Guide to Personal Budgeting

I know, it's not a glamorous topic but still one I think is worth mentioning. Specifically, for those learning how to. Maybe you've just started working and are keen to track your spending or because you just haven't been taught how to. My aim with this post is to give you some steer on how best to start doing that.

It's crucial to develop healthy financial habits, and the first step is creating a solid personal budget. Many young adults can get overwhelmed when it comes to managing their finances (I was one of them!) However, with a bit of guidance and discipline, you can take control of your money and build a secure future. In this blog post, I will share the 20/30/50 rule I learned (much later in life btw) and provide you with a personal budget template to kickstart your financial journey.

The 20/30/50 rule is a straightforward and practical guideline for managing your income. It recommends allocating 20% of your income to savings, 30% to your wants, and 50% to needs (essential expenses). Let's break it down:

• 50% for Needs/Essentials:

  • This category includes necessities like rent or mortgage, utilities, groceries, transportation, insurance, and healthcare.

  • Keep a close eye on these expenses, and try to find ways to minimize costs without sacrificing your well-being.

• 30% for Wants/Discretionary Spending:

  • Use this portion for non-essential spending like dining out, entertainment, hobbies, and other personal luxuries.

  • While it's essential to enjoy life, be mindful not to overspend in this category. Track your discretionary expenses to identify areas where you can cut back if needed.

• 20% for Savings:

  • Building a financial safety net is crucial. Allocate 20% of your income to savings, including an emergency fund, retirement savings, and other financial goals.

  • Set up automatic transfers to your savings account to make it a consistent habit.

Creating Your Budget: To help you implement the 20/30/50 rule, we've provided a simple personal budget template. Download it here and follow these steps:

Monthly budget tracker.xlsx

Download XLSX • 32KB

• Income:

  • List all sources of income, including your salary, freelance work, or any other supplementary income.

• Essential Expenses (50%):

  • Detail your monthly essential expenses, such as rent or mortgage, utilities, groceries, transportation, insurance, and healthcare.

• Discretionary Spending (30%):

  • Break down your discretionary spending into categories like entertainment, dining out, hobbies, and personal care.

• Savings (20%):

  • Allocate 20% of your income to savings. This can include an emergency fund, retirement contributions, and other savings goals.

• Review and Adjust:

  • Regularly review your budget and adjust as needed. Life changes, and so should your budget. Be flexible and adapt to your evolving financial situation.

Taking control of your finances may seem daunting at first, but with the 20/30/50 rule and a well-organized personal budget, you'll be on the path to financial success. Remember, the key is consistency and discipline. By developing these habits early in your career, you'll set yourself up for a financially secure future.

Happy budgeting!