The most important rule you need to know about budgeting

Let’s face it: budgeting can be pretty overwhelming.

Ish happens. Things that you didn’t even know could break are now somehow broken, and that money you were planning to save or commit to another goal has to be redistributed to repair it.

How does life expect you to plan when it keeps acting unpredictably? Howthhh?! Life happens to us all, but what separates those who stay ahead of the game from those who are perpetually broke is that those in the former group actually plan for these unexpected moments, even if they’re not quite sure what it is yet, and one of the ways they do it is by following the 50-30-20 rule.

The best thing about the 50-30-20 rule is that you do not need a complicated spreadsheet in Excel or an app (though if this is your speed, go forth, sis).

The 50-30-20 rule is simple. Half of your income should be catered to your essential expenditure, 30% should go toward flexible spending and the remaining 20% should go toward savings.

When I say 50% goes toward essential expenditure, it doesn’t include those new season pair of Aldo’s (even if they’re for work). I’m talking about your living expenses, utilities, groceries and transportation for WORK, not Machel Monday.


Let’s take 20% and put that toward your financial goals. As a financial advisor, I’m supposed to formally tell you that this is the most important part of the rule, but I’m going to remove that hat and tell you as a friend. SIS, that ish is muy importante.  20% of your income SHOULD/HAVE TO/MUST go toward your financial goals because you’ll end up living in shoulda/coulda/woulda mode if you don’t. These funds can be used to building your savings, an investment portfolio and even pay off debt.

The remaining 30% is your reward for being so disciplined and it can be used for flexible spending. Here is where you can splurge a little on things you want but not necessarily need, which means you can use these funds to get those Aldo’s or even go to Jamaica for Dream Weekend. Remember the old adage about all work and no play makes Jack a dull boy? You can enjoy yourself, but make sure your flex spend doesn’t go past the 30% mark. Going beyond is living above your means!


Now that we know where we are aiming, let’s get to implementation.

1. Track your expenses: this includes that cup of coffee from Rituals and the doubles you bought on your way to work. What, you don’t keep your receipts?! It’s 2019, how will you know where your money is going if you do not keep track of it? Even if you don’t get a receipt from some vendors, e.g. the doubles man, keep a note on your phone of your expenditure for that day.

2. Now that you’ve got them, you can then put them into the categories: Essentials, Financial Goals and Lifestyle/flexible spending. I get it, you’re not yourself when you are hungry and tired, but as much as possible, avoid daily impulse splurges because they eventually add up. Instead, maybe try getting up a little earlier in the morning to prep your breakfast; these little habits will help to keep your daily expenditure down.

3. Be mindful if you are overspending on stuff you want but do not need, when you get to that point, it’s time to cut back to save more.

Keeping your finances as simple as possible helps you stay disciplined and eventually, it’ll become second nature. To make life even simpler, set up a standing order with your bank so that 20% can be deducted automatically and go toward achieving your financial goals. You can also do it for monthly bills and utilities.

The 50-30-20 rule also offers flexibility. For me, giving to charitable causes is a must, but I could not fit it in my essentials, so I made it a part of my lifestyle. Some people have to move out from their homes to urban cities to be close to work, therefore their essential expenditure takes up more than 50%. The most important thing to remember is to monitor and categorise your spending, and, as much as possible, let the 20% be the last to depreciate or decrease and the first to appreciate or increase.

Be consistent monthly, take action daily, and give yourself room to enjoy tomorrow.

Your older self will thank you for it.



Charielle Plowden (BSc Hons) is a financial professional currently pursuing International Wealth and Investment Management and holds a Financial Advisor certificate with the Institute of Banking and Finance. She’s worked in the financial services sector for the past four years, is a registered advisor with TTSEC, and currently sits on the board for Nestle Credit Union. Follow her on Instagram and LinkedIn.

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