Oh what a topic! Money! It can bring the best and the worst out in people. It can build entire communities and it can also tear families apart. It is fair to say, everyone has their own individual opinion of money and how the use it.
An important point to remember about money is that it is just a tool. It wont love you, it won’t hate you and it certainly won’t stop you from leaving this earth once your body finally expires.
So, after that morbid though, let’s make light of this minefield of a subject shall we?!
I will break down how we use money by giving a brief outline of our budget figures. The method we use can be used for any budget whatsoever, so if you are struggling with your cash flow, this could really help you.
It’s a good old fashioned 70/20/10 method. If you have heard of this, you will know it’s a really good method. If you haven’t, let me explain...
70
This is the percentage of our monthly income that we spend. When I say spend, I don’t mean we go shopping! I mean this is everything that goes out in the month. This amount includes all of our household bills, food shopping,
Insurances, car fuel, eating out, treats and so on. If we are low on funds...it’s tough luck for eating out or extra treats that month! But this rarely happens anymore 😊
20
This percentage of our income is our savings. No, this doesn’t mean we stick 20% in a special savings account. This is in fact split into several accounts, 4 in fact!
Out of this 20%, we then break it down even further.
20% goes into our house fund
10% goes into our car fund
50% goes into our holiday fund
20% goes into our gift fund
This way, we always have a pot of money ready and waiting for those dreaded house and car repairs. We have a lovely, healthy holiday fund and we also have a nice pot of savings for gifts (Birthdays & Christmas)
10 This is a proper savings account which we DO NOT TOUCH! This is the disaster fund! Until this pot has enough to sustain us completely as a family for at least 5 years, we will continue to pay into it. You never know what is round the corner, so always be prepared for the worst but hope for the best. Hopefully, we won’t need to dip into this, and it will then simply become an early retirement pot - win/win!
Should you be in some debt, then the above plan will need to be a adapted accordingly. I would change the 20% to put towards your debt until it is paid. I would certainly still keep the disaster fund. Because being in debt up to your eyeballs then having a disaster is horrid - yes I have been there!! If you are in debt, keep going! You will get out eventually but you must remain focused and patient in the meantime.
So that is a basic overview of our budget method. It works for any budget so why not give it a try...
To help you plan, we have a downloadable budgeting sheet to help HERE
More financial planners and trackers will be added soon so keep an eye out for those.
Happy Planning!
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