Budgeting | A Guide Using Excel & More!
Why Budget?
Budgeting is one of the most important financial habits that you can develop. This blog intends to help you create a budget to begin your financial security and growth journey.
Track Your Spending
Budgeting is not just about setting you're spending amount, it’s about tracking where your money goes. I've developed and attached an Excel template to help you monitor your income and expenses effectively. By reviewing your spending habits regularly, you can identify areas that need to be adjusted to ensure you stay on track with your financial goals.
The 50/30/20 Rule
Once you have logged your income and expenditures it's a good idea to start setting those percentages. The 50/30/20 rule is a simple budgeting framework that divides your income into three categories:
- 50% Needs – Essential expenses like rent/mortgage, utilities, groceries, insurance, and minimum debt payments.
- 30% Wants – Non-essential spending like entertainment, dining out, subscriptions, and travel.
- 20% Savings & Debt Repayment – Emergency funds, retirement savings, investments and paying off additional debt.
This framework is a good starting point, it’s not a one-size-fits-all solution. If your essential expenses take up more than 50%, or you want to prioritize savings, feel free to adjust the percentages to suit your lifestyle. For instance, if your rent is higher, you might allocate 60% to needs and reduce spending elsewhere.
Prioritise a Rainy Day Fund
Before beginning to invest or spend on large purchases it is always important to ensure you have a 'Rainy Day Fund' to cover any unexpected events in your life.
- Reach £1,000 in an Emergency Fund – This will cover unexpected expenses like car repairs.
- Save 3-6 Months’ Worth of Expenses – This acts as a cushion in case of job loss or any other financial emergencies.
Final Thoughts
By tracking your expenses and adjusting the 50/30/20 rule to fit your lifestyle, you’ll create a financial plan that works for you. Prioritise building an emergency fund, then work towards other goals step-by-step.