Percentages

I know I have written on budgets before but because it is such an important topic, here are some more tips.

When creating a budget, there are a few rules you may want to use. One of them is the 50/30/20 format.

The theory behind the 50/30/20 is that 50% of your income is applied to housing and bills. 30% is allocated for wants and entertainment and 20% goes to savings, investments and paying off debt. There is also the 80-20 rule: 20% for financial goals as in savings etc. and 80% for everything else.

That is the ideal. Sadly, many of us can’t adhere to those rules.

I live in Vancouver, BC, which is a very expensive city to live in. Property is expensive and so are rents.  50% of income going to pay rent or a mortgage is not unheard of. Too often, people don’t have the funds to be able to put away 20% of income. So what do we do?

The best we can. Personally, I would feel hopeless whenever I read some of these budgeting rules. I would feel desperate – with my income and debt load, there was no way I could afford to follow these guidelines. Whenever I start to feel this way, I find that taking action makes me feel better.

I couldn’t afford to put 20% away for savings but I wanted to start saving money. So I started putting away $5 a month then increased it to $10. It goes into an account that penalizes me whenever I take money out. I also put a little into RRSPs (registered retirement savings plan) every month. I found lower interest rates for my credit cards, making it easier to get the debt paid off. I started to control my spending and managed to do it and did it without feeling  deprived. It’s amazing that when you really look at what you are spending money on, how easy it is to cut things out that you don’t miss. Like cable TV. I watch everything online now. And that is only one example.

I am working to get to the percentages advised above but I am not there yet. I am also not going to stress out about it. I am happy doing the best I can and better than I was before.

Do you want to learn the 5-step process I used to save myself over $400,000.00 in future credit card interest charges? Then join the 7 Days Towards Financial Stability Challenge either through my Faceboook group or through email. Go to www.karenmagill.com to learn more.