You might want to sit down for this one.
There’s a new budgeting rule doin’ the rounds and it could change the way you look at your bank balance.
According to Mint Life, the 50/20/30 rule is the perfect budgeting plan for people in their 20s.
Basically the rule is that you should spend 50 per cent of your income on the essentials, you should save 20 per cent of your income, and you should spend the remaining 30 per cent on the fun stuff.
Lemme break it down for you:
The essentials – 50 per cent of your income
The clever people at Mint Life say you should set aside 50 per cent of your income for the essentials – the stuff you need to get through your every day life.
Essentials include things like rent, food, electricity bills and transport.
How much of the 50 per cent is divvied up between the essentials will depend on your lifestyle – you might pay high rent but save money on transport and electricity and vice versa.
Savings – 20 percent of your income
Once you’ve got the essentials sorted, you should direct 20 per cent of your income towards savings.
This amount includes savings accounts, paying off existing debts, and rainy day funds.
This category is all about paying off debt quicker and setting yourself up for your future.
Personal – 30 per cent of your income
This is the fun bit.
The remaining 30 per cent of your income should go on the things that enhance your lifestyle.
What these things are will vary from person to person but could include your Netflix subscription, those morning coffees, your gym membership, and your Friday night drinks.
Basically, you put aside $1 on Monday, $2 on Tuesday, $3 on Wednesday, etc. Then start the process from $1 again the following Monday. It equates to saving $28 each week and $112 each month.
The challenge is an improvement on the 52 Week Plan, a tried-and-tested saving method by which you slowly build up your contributions throughout the year.
Under this plan, you put away $1 in the first week of the year, $2 in the second week of the year, all the way up to $52 at the end of the year.
Problem is, this sees you saving the largest amounts of money during the most expensive time period. Christmas and New Year’s.
The 365 day challenge is more manageable and it will see you save $1456 in a year – which is $78 more than the 52 Week Plan.
You can find out more about the 50/20/30 rule over at Mint Life.