Budgeting 101

I’m sure you’ve come across the term “budgeting” countless times. It’s become quite a buzzword these days, and almost everyone claims to have a budget. But let’s be real: do you actually stick to your budget? It’s way easier to start creating a budget for how you want to spend your salary before the end of the month.

You know how you become financially conscious when you’re broke, full of determination to take control of your finances and follow a budget?

Well, until your salary lands in your account, of course, then every sense of reasoning flies out the window. Then you start buying everything that seems shiny enough to attract you — eating out with the guys, going on shopping sprees — and even the budget you took time to create is nowhere to be found.

And then you get broke again. Don’t worry; we’ve all been guilty of this. So, let’s talk about a solution to help you overcome this cycle.

How do you create a budget you can easily stick to?

There are different budgeting strategies; however, for today, we’ll focus on one of the strategies that will help you better budget your salary to cover space for investment and savings. It’s called the 50–30–20 rule.

Here’s how it works: According to the 50-30-20 rule, you divide your income into three categories: needs, wants, and savings, with a ratio of 50/30/20. First, allocate 50% of your income to cover your needs like groceries, housing, transportation, insurance, utilities, etc.

Next, set aside 30% for your wants because, let’s face it, we all deserve to enjoy our hard-earned money, so it’s unrealistic not to set a budget for that. This category could include things like dining out, going out with friends, treating yourself to cool gadgets, or attending concerts because, why not?

Finally, reserve 20% of your net income for savings and investments because the type of wealth you imagine will not leave your imagination and become reality unless you start actively working towards it, and what better way to do so than to protect a part of your income for savings and investments?

As Robert Kiyosaki once said,

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”

Let’s break it down with a practical example. Suppose you earn $300 per month. That means:

• 50% x $300 = $150 for your needs.
• 30% x $300 = $90 for your wants.
• 20% x $300 = $60 for savings and investments.

However, like most money strategies, this one isn’t set in stone, and you can adjust it to fit your financial situation. For instance, if you’re a young person with fewer responsibilities and more disposable income, you might allocate a larger portion to savings and investments. On the other hand, if you’re a family person, your allocation might differ. The key is to effectively utilize your income to cover your essential expenses while keeping track of your finances and holding yourself accountable for your spending.

One great way to protect your finances is by saving in stablecoins. They help your money stay stable and unaffected by economic fluctuations. You can consider creating a fixed savings account on Xend Finance, where you can save in dollar-pegged stablecoins and safeguard your savings from currency devaluations.

Remember, budgeting is all about taking control of your financial life and making your money work for you. So why not give the 50-30-20 rule a try and see how it can help you achieve your financial goals?