Setting Up A Minimalist Budget

A budget should not be viewed as mere bill payment mechanisms and should be used to control how much money is spent in a month. Not many people use budgets to set aside money that can be used to buy just the essentials and end up sending a lot. One good minimalist budget strategy is known as the 50/20/30 strategy.

It is a simple philosophy that makes use of simplistic principles that are guided by a budgeting system. If you wish to establish a balance between your earning and spending, then this system can pay off.

The 50/20/30 rule can teach you to start saving right from a young age and make it simpler to make minimalist budgets all your life. You are always allowed to make a few adjustments here and there as long as you stick to the basic rules. The core concepts are simple to understand and adapt. The budgeting system will ensure that you establish financial grounding. Here are the different rules of the 50/20/30 budgeting system explained.

Budget 50% of Your Income to Set aside for Essentials

The very first rule to abide by states that you have to set aside 50% of your income for essentials. This can be a necessary part of life if you wish to live as a minimalist. The initial step to achieving this would be to consider the different things that can be classified as essentials. Not everything will be essential, and only those things that you cannot spend the entire month without will be considered essential. It will depend on where you reside and the things you need to live comfortably. In most cases, these expenses will be the same and include food, transport, and utility bills.

The percentages might differ based on what and how much a person needs. It comes down to the total sum based on the individual costs. Say, for example, some people might live in a small apartment but commute long distances. Some might live in a bigger apartment but walk to work. In this case, one person would have to have a larger budget for transportation and a smaller budget for his living expenses. And for the other person, the opposite would be the case. He would need to account for a larger living expense and a less expensive transportation cost.

Budget 20% of Your Income to Set Aside for Savings

The next step is to set aside 20% of your income for savings. It is extremely important to save or have an emergency/debt/future fund in place. You have to add money to these accounts on a regular basis so that you can secure your future, but you only have to add money to this fund after you have set aside 50% of your income for essentials. For this to work, it is important to take this fund seriously.

You must ensure that 20% of your income is calculated and directed towards this fund. Again, the amount might differ month to month based on how much you are contributing to the previous fund. You are allowed to tweak it but not allowed to forgo it. You might tell yourself you will forgo it one month and contribute a little extra the next month, but this might not work out as you will end up making it a habit is never too soon to start saving for your retirement, and the sooner you start, the better off you will be.

Budget 30% of Your Income to Set Aside for Personal Use

The next and last category is about setting aside 30% of your income for personal use. Some financial experts might say that this is an unnecessary category, but it can be quite difficult to completely eliminate certain expenses that come up every now and again. It is fine to spend just 30% of your income on certain things but can be reduced if you are able to control temptations.

Any remaining money can be contributed to the funds from the previous category. Some of these items can include cell phones, parties, cable television, new clothes or shoes, eating out at restaurants, etc. You can decide on things that are important and those things that can wait.

We’re trying to live more of a minimalist lifestyle here, so only get new clothes, for example, if you really need to. Don’t buy new clothes simply because you have money leftover in the budget for them. Use your extra money wisely and understand that you might not need to use 30% of your income for personal use. If that’s the case, then don’t be afraid to save more than 20% of your income per month.

You really don’t want to give in to pressure. Buy only those things that are necessary. For example, it is a good idea to indulge in some fitness-related aspects such as joining a gym or buying gym equipment, etc. Your personal expenditure can also include buying gifts for others, but remember that you are only allowed to spend 30% of your earnings and not anymore.

Conclusion

It might seem like a tough task at the beginning, but it will get progressively easier as you go. Establishing these basic habits right from the beginning can help you reap the benefits for the rest of your life. You do not need a high income to be able to make these basic contributions. Even those who have just started working can adopt this plan. You can get the percentages right just by following a simple budget. Repeat the budget every month and make any minor changes based on the level of expenses.

With time, you will be able to save more money and put it to good use. The percentages can provide an ideal framework for you to base your monthly budget upon. You can determine what is essential for you and how much should be allocated for the different expenses. Consider taking your spouse’s help and get them to follow the same budget. You can save more together and contribute a bigger sum to your retirement fund. You can also find software easily that will help you allot the money according to the 50/20/30 rules.

 

Curtis