Budgeting is like a plague we’ve learned to avoid in conversations, from how we run it as Nigerians and how we guide through the month even with the size of our salaries. Regardless, through the years there has been an effective framework that helps from young adults stabilize their funds to older generations keeping their families afloat in this current wave of inflation.
So, what is this budgeting hack? The 50/30/20 framework is a strategy that splits your income source into three; 50% Needs, 30% Wants, and 20% Savings.
1. Needs: These are the essential expenses that you cannot live without such as your bills, food, and other necessities.
2. Wants: These are spending for things you enjoy but don’t necessarily need.
3. Savings: Of course self-explanatory, This is money set aside for future goals, emergencies, or debt repayment
How to Use the 50/30/20 budget
– Calculate Your Monthly Income
Determine your monthly income. This might be a fixed salary, freelance earnings, or any other source of income and then break it down into the portions of 50,30 and 20. If you earn 100,000 per month, that would be 50,000 for your needs, 30,000 for your needs and 20,000 for your savings.
– Breakdown Your Expenses
Know what your expenses are and where your monies are spent. How much you pay for transportation, electricity bills, data etc.
– Keep Track
Always ensure to keep track of your spending and immediately seperate your funds as you recieve them. You can use a money app or financial journal to help you stay in check with your spendings and savings.
– Prioritize Your Needs
Always make sure your essential expenses are covered first. Look for opportunities to reduce discretionary spending. This might mean cooking at home more often, avoiding black tax or finding free entertainment options.
-Stay Disciplined
It’s easy to overspend, especially when you’re tempted by wants. Remind yourself of your long-term goals and why you need to save enough for the future regardless of the economy’s situation.
Lastly, Make The Most Of Your 20%, proactively let it go into investments or interest giving banks such a piggyvest or cowrywise or stock market. Learn more about financial options such as the mutual funds, money markets or stocks, which you can always leverage on with whichever investment appetite you have.
