Do you start each month with the best of intentions to stick to your budget and save more than or at least any money (unlike previous months) - only to find that you've spent more money than you wanted?
Despite your best efforts, it just seems to happen, and somewhat reassuringly is that you're not alone.
However, before you swear off budgeting or beat yourself up over how you could go about curbing overspending, read on for more on a simple and practical, budgeting solution to this dilemma and that is the 60/40 budget method.
It's one of the most adaptable percentage-based budget strategies you can consider as a practical budgeting resolution, to curb overspending.
Here is how to breakdown the 60/40 budget strategy, to create a roadmap to achieve your financial obligations and goals:
These are mandatory or fixed expenses. Namely, basic things you need to survive - like rent, transportation, utilities, groceries, insurance, and internet (if your profession requires internet connection).
If truth be told, we tend to pay more attention to essential or overhead expenses. However, it's just as important to have and prioritise non-essential expenses for an all-around approach as to how to accomplish all your financial goals too.
Start by taking control of your finances by having a budget: to best match your goal with your income balance. Financial goals give you a reason to take charge of your money. With the end goal in mind, it gets easier to plan out your budget and stick to it.
Here are the two possible ways to go about it, based on your monthly financial obligations.
Choice 1: Divide Into Chunks Of 10%
Start by setting aside funds ten percent of your total income or towards short-term financial goals, which are easily achievable within 12 to 24 months.
It includes holidays, home repairs, new appliances, gifts, and other irregulars yet predictable expenses.
This 10% chunk is set aside for larger purchases that take longer to achieve (usually five years or more) and require more planning and more of your determination. Examples of long-term savings and investments in this category are saving to buy property, a vehicle, pursue education, or buy shares.
Saving up for retirement is critical to consider in your financial planning. A practical percentile to kick-start setting up a nest egg for your future is contributing 10% of your salary into retirement. Ensure that you contribute monthly to steadily and routinely build up your retirement fund.
Did you know that the main reason many people ignore or dislike budgeting is the perception that; budgeting means being tight-fisted and eliminating fun from life?
On the contrary, a budget that does not balance work and play makes for unrealistic budgets. For that reason - setting up a practical financial plan is a budget that allows for a work-life balance whilst you responsibly enjoy your money.
Choice 2: Divide Into 20% To Debt Repayment & The Remaining Percentile Into 10% Chunks
If choice 1 is not a practical budget option for you, this option is a more flexible option where debt repayment is your primary financial goal.
Here is the recommended way to do so:
As for the remaining 20%, divide it into half and assign each half as follows:
As earlier detailed in this article, money for short-term financial goals should be easily accessible to meet short-term goals. Examples include road trips, holidays, home repairs, new appliances, gifts, and other similar expenses that are adjustable yet likely.
Remember, a budget that does not support your work-life balance is no good.
By setting financial goals, you have a mental roadmap to guide where your money should go and how much. Similarly, by budgeting for fun or leisure, your budget works out as a practical plan that leaves room for work and fun times.
Setting a budget is the crucial first step to being financially sound. Start from the beginning: identify how much you make and spend each month before settling on a budget strategy.
So, why should you purposefully consider the 60/40 budget strategy?
It is easily the most flexible budgeting setup for beginners and for those looking to switch to a flexible percentage-based budget system.
The cherry on the top is that this budget plan is adaptable to adequately meet unexpected costs without compromising your existing financial commitments or goals.