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Budgeting rules: what are they and which is best for you?

Reading time: 10 minutes
Scottish FriendlyFebruary 22, 2024

For some, budgeting may seem like an intimidating topic. However, it is also an important step to reach financial freedom. Whether you use apps, spreadsheets, or good old-fashioned pen and paper, budgeting is not about restricting yourself. Instead, it’s about taking control of your finances.

Life for most people can be busy and it can be difficult to keep track of our daily lives. If you’re looking for ways to bring your spending down, a budget plan can help you or your family keep track of spending. Perhaps you have heard of the term “budget rules”. Essentially, these are ways of categorising your expenses into needs, wants and savings, and helping you to decide how much of your income to allocate to each one. 

If you find it difficult to keep track of your spending, don’t worry, you are not alone. In fact, according to the Financial Capability Survey, 39% of adults in the UK don’t feel confident managing their money. 

Perhaps budgeting rule can help you!

The 50/20/30 Rule:

This is regarded as the ‘golden rule’ of budgeting.

Essentially what this means is to divide your after-tax income into three categories: 50% for needs (for example utilities and groceries), 30% for wants (for example Netflix subscription or weekend brunches) and 20% for saving and/or debt repayment.

Some people use the 70/20/10 rule however the basic concept is the same.

This rule can be thought of as the ultimate balance for your finances. By allocating your income in this way, you can cover your essential expenses as well as treating and enjoying yourself. While it may not always be realistic to strictly abide by these rules every month, it is a great guidance to spend your money sustainable way.

Even by using the 70/20//10 rule, while more money is set aside for needs, this rule still leaves you with 10% to put in your savings every month – which can add up to a lot more than you may think.

Do what works for you

The 50/30/20 and the 70/20/10 rule may not be good fits your income, expenses and savings goals. That’s okay – there are many ways you can manage your money.

The important thing about any budget method is that it’s sustainable for you in the long-term. Here are some other examples of budget rules you could use:

  1. The ‘pay yourself first’ rule means that before you attend to paying bills or treating yourself, you allocate a portion of your income to savings or investments. This is essentially a way to help your future-self and ensure you can watch your savings grow – which can be incredibly rewarding and motivating!

  2. Tracking your spending, whether that is through a budgeting app or on paper, enables you to keep tabs on your spending habits. You may find yourself gaining valuable insights into your spending habits which allow you to recognise where you may want to make changes.

  3. Make your own budget rule. If you are able to, spend some time calculating your regular monthly expenses and work out the percentage of what your “needs” are. You can then divide the rest into “wants” and “savings” depending on what works best for you.

Sticking to your budget rule

The main benefit of a budget rule is that it takes the complicated process of building a monthly budget and makes it simple. No matter what budget rule you decide to follow, remember that the best budget is one you’ll actually stick to!

There are many tools and tricks out there to help stay on track.

  • Download a budget tracking app. Take the time to fill out all your expenses, income on an app so it can help you keep track of your spending. You could also turn on the app notifications you are notified when you’re getting close to your budget limit in a specific category.

  • Set up direct debits for your necessary expenses and savings. This may prevent you from forgetting to pay a bill or putting money in your savings.

Embrace flexibility

Life happens and it is not realistic for budgets to always stay set in stone. Unexpected expenses or changes in income often occur and it is normal to adjust and adapt to what works best for you.

The goal should never be perfection – instead it should be progress. It is all about empowerment and reaching financial freedom. Embrace the rules that work for you and happy budgeting!

Scottish Friendly does not provide financial advice. If you’re not sure what plan or approach is suitable, you should contact a financial adviser. Advisers may charge for providing such advice and should confirm any cost beforehand.


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