Step 19: Budget with the 50/20/30 rule

Step 19 of the 100 steps mission to financial independence: Budget with the 50/20/30 rule
Step 19: Budget with the 50/20/30 rule

When you were making your first budget in step 17, you might have felt it was a bit of a stab in the dark. Maybe you would have appreciated a simple formula that indicated how to allocate your money in a way that would just make it faster and easier to budget. A formula that also ensured you’d work towards you goals. Or maybe you were happy to rely on your own methods but would now like to find out about a general indicator of how much to allocate to each area.

In this step we are going to have a closer look at a very common concept in budgeting, the so-called 50 / 20 / 30 rule. I’d like to think of it as a guideline more than a rule, as depending on your financial position and your goals, your expense patterns change and you might spend more or less in certain categories at certain moments in your life. It is therefore wise to not just adopt but to adapt this guideline and adjust it to your own specific needs and circumstances.  Continue reading

Step 10: Identify your Variable Expenses

Step 10 of the 100 steps mission to financial independence: Identify your Variable Expenses
Step 10: Identify your Variable Expenses

In step 9 we looked at fixed expenses, but apart from these regular payments of a set amount, you most likely also have regular expenses which vary from one month to the next: your so called variable expenses. Indeed a variable expense generally:

  1. is an expense of a variable amount that you have some control over
  2. has a regular time interval
  3. is needed for day-to-day living
  4. you can cut down by making small lifestyle or behavioural changes.

An example of variable expenses include groceries: you need to eat for day-to-day living, they have a regular time interval, as you probably go to the supermarket several times a month but contrary to your fixed expenses, you have some control over the amount on your grocery bill. Continue reading