How to use the 50/20/30 budget rule


(Beatrice Borbon) #1

Try a new technique for budgeting:


What we’ll build in 2019
#2

But what if you’re living paycheck-to-paycheck and the ‘Needs’ cover about 80% of your monthly income…?


(Steve Chandler) #3

Yeah I’m guessing that does not work for the majority of people these days. Wasn’t it stated recently that an estimated 40% of Americans were living one paycheck away from bankruptcy/poverty.

Great idea, if you were sensible with your money in the first place.


(TWM) #4

Yeah, it’s a Tuffy. I’d say those in the situation and I appreciate not all are the same but you need to kill your debt and I reckon screwing your life back to the bare minimum is for the best in the long run, knock the heating down and wear a jumper, ditch the sky subscription, stop smoking, stop drinking, stop the take aways, walk places. It’s hard but if you screwed everything back to the bare minimum and I mean the absolute minimum with 0 exceptions then that wee bit of pain will make all the difference in a year’s time.

Also, you should make it hard for yourself, be hard on yourself and then when you get clear and you can relax you will remember how hard it was and how Sh1t it was which inturn will help you stay on the right road and help prevent you getting back into such a mess.

Good luck.


#5

It’s the problem with modern society - we are unable to compromise, cut down or realise that half of the crap we spend our money on is non-essential.

A friend, for example was complaining that he has no money and can’t afford his pension payments, yet has a Spotify subscription, Netflix, Amazon Prime AND a £50 per month phone contract.


(TWM) #6

I fully agree, people just don’t respect money and therefore don’t understand it’s real value.


(Ben ) #7

I think the 50/30/20 rule is very interesting, and certainly fits well with a zero sum budget if you’re trying to put both together.

It for me falls under the area of “what gets measured, gets done” - and even if the exact breakdown is aimed at an American audience, or your situation requires something different, it’s still a useful ‘barometer’ to see where you are - and actually consider what your true expenses are.

And I find a big part of that is down to the education around finances folks get growing up. When I was a teenager, the financial education I got was…

“DON’T GET A CREDIT CARD THEY ARE BAD” and similar themes. And eventually when I did first get one I ended up deep in debt that I’m still repaying, much older and wiser.

Plus add in all the modern pressures of social media, constant advertising, all these services that just cost a few £ a month… It’s not easy and learning about finances while is more accessible than 10 years ago still isn’t common!


(TWM) #8

I agree with what your reply saying about education on money, it’s minimal at best in school. Similarly when my kids are at home I am guilty of just supplying what they need without them giving a thought of where it comes from or how I manage to magically make it appear, having said that I have taken note and times are changing, my son has a ski trip with school in 2020 and while I am more than happy to pay for this I have tasked his with providing the final £100, this has caused him a little stress as he is realising how difficult it is to create wealth, he has managed to earn £30nso far and he has another 9 months to find the next 70, hell mange it I’m sure, however if not I am more than happy to step in and make up the difference (he currently does not know this) I figure that this wee lesson is worth far more that the £100 it is saving me.


(Rob) #9

Would be excelent if Monzo intergrated this 50/30/20 method into the budgeting section, so it could tell me what my actual percentages are without me having to make a spreadsheet, then after the needs and savings have been deducted it could give me a daily budget for my wants. Interestingly Dozens seems to have a daily budget tracker.

A simple way to start implementing this could be to classify the budget categories into the 3 categories: needs, wants, savings

Monzo’s goal is to ‘make money work for you’, and the pots certainly do help with this but the budgeting tools are IMHO a bit naff and dont really tell me much, this is an area that really needs improvement and i strongly feel that being able to set a monthly ‘wants’ budget and then monitor it on a daily basis like the dozon app does, if combined with the facility to budget agaist the 50/30/20 rule, then this really would live up to the Monzo ethos of makeing your money work for you.

Time to up your budgeting game Monzo!


(Adam) #10

It would be great if they did, but maybe it’s technically unworkable.

For example, I overpay my mortgage by £50 a month at the moment which comes out as one transaction. So that one payment is mostly “need” but £50 “savings / paying off debts” all lumped into one.


(Rob) #11

No reason it couldnt be manually adjustable, an algorithm would say look at look at your direct debits/standing orders and create its initial ‘needs’ then you could adjust it up or down as you see fit for say your overpayment circumstance or other circumstances like joint morgage payments.

Combine this with being able to view your other bank accounts like you can with this open banking thing and then you have a very powerful and simple budgeting tool.

I feel trying to impliment a zero sum budget tool would be way too much effort for most people (inc me) to bother with. 50/30/20 seems much simpler to implement and be of use to more people to see at a glance what their ratio is. At a guess i reckon i’m probably on 55/40/5 so it would be cool if monzo budgeting actually showed me that and then let me set a goal of achieving say 55/35/10 and based on that 35% monzo would work out my daily budget.


(Adam) #12

So I’ve exported my January spending from the app, imported it into Google Sheets to allocate y spending to each category. It’s pretty sobering!

Rather than 50/20/30, I’m hitting 63/16/21!

This is exactly why I switched to Monzo, so I can get a much better idea of where my money is going. So now I’ve got the task of trying to reduce my needs. Part of this is paying off a credit card, sofas on 0% finance and a laptop on 0% finance. If I remove those minimum payments, the “Needs” category goes down to 55%.

Time to start addressing this ASAP. If anyone’s got any tips, them please enlighten me! I’ve already gone through my “Needs” and I’m not sure what I can do:

  • I’m with Bulb and seems like it’s still the cheapest when I go through comparison sites
  • I’m already paying off at least double the minimum payment of the credit card to bring the whole thing down
  • Council tax, mortgage (fixed term at the mo), water I can’t do anything about
  • I try shop in Aldi most of the time

I’m putting away £20 pm into a Moneybox ISA - I could switch this over to credit card payments, but that seems negligible. Then again, if I consolidate the £130 I could pay off the laptop in one go - think I’ve answered my own question there!

January%2050_20_30


(Richard) #13

What do you do regarding lunches? Do you buy out a lot?

I always try to cook enough dinner to have some left over for the next day. If I don’t I then have a draw of noodles and beans as back-up.

Do you drive? If so have you considered your driving style? Driving more economically can knock loads of your petrol usage.


(Adam) #14

I make all my lunches (I’ve recently changed my diet, so am watching what I eat like a hawk!).

Driving style is an interesting one. I might do an experiment this month and see how it affects my petrol usage.


(Richard) #15

Rough guide:

I have to admit, I saw my fuel efficiency increase when I stopped rushing to already red lights etc.

I travel down motorways at 60mph

When I see traffic slowing down and slowly decrease my acceleration. Apparently, moving from a standstill consumes loads of petrol so I always try to get to a point where the traffic or lights start to move just as I approach them.

Also in rush hour traffic I generally drive at 10-20mph. I don’t see the point in stop, starting, stop, starting so I leave a good distance and roll slowly towards forwards.


(Sam) #16

I’ve not read the article so it may mention it in there anyway - but Costco is the best for petrol and diesel, if you’re eligible for a membership and have one close by. Generally 2/3p cheaper than the supermarkets.

Also - to easily track your fuel spending, download an app like “Fuelio” (on Android, not sure about iOS). It lets you calculate your real MPG and track spending on fuel over time. Really useful to me.


(Adam) #17

I think I can use VW Connect for this - I had a dongle installed in my car which means I can sync mileage to my phone and correlate that with my fuel spend.


(Colin Robinson) #18

I’ve switched to Huel for 2/3 meals - table 2 shows £1.61 per meal. Easy enough for me to do - single and semi retired so no one else to worry about feeding. :wink: Might be useful?


(Gavin) #19

I’ve found, after 20 years of having a car in one shape or another, the best way to save money is to not have one. I used to make excuses to have a car, but they were a money pit whether it was a newish one with low maintenance but a monthly payment, or an older one with no payment but the annual eye-watering MOT bill.

Yes, there are occasions where a car makes sense, but these days I rent one for the day (costs around £50-£70) and then give it back. The rest of the time I can get around with a £50 per month bus pass and a bicycle.

Taking into account the monthly payments, insurance and maintenance, I’m probably about £200 a month up, overall. More importantly, my outgoings are far more predictable and I don’t get stung with massive bills when I least expect them.


(Adam) #20

This year is the first year I’ve actually needed to own a car (I’m now 35)!

I’m a junior doctor, so have to travel far and wide for training as the Northeast training catchment area goes from the Scottish borders, down to North Yorkshire and across to Cumbria.

A car is something I need to have at the moment, but would love to get rid of if I could.