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‘Budgeting’ for people who don’t budget (and probably never will)

Most people are aware of the importance of saving money and controlling expenses.

A great way to do just that is to draw up a budget.

If you’re not the budgeting type; you may want to consider the following simple savings plan - called the “50/15/5” (developed by Fidelity in the USA).

50% of your take-home pay goes to essential expenses.

  • Housing — mortgage, rent, property tax, utilities (electricity, etc.), homeowners'/renters' insurance

  • Food — groceries only; do not include takeout or restaurant meals, unless you really consider them essential (e.g. you never cook and always eat out)

  • Healthcare — health insurance premiums and out-of-pocket expenses (e.g. prescriptions, co-payments, etc.)

  • Transportation — car, petrol, car insurance, parking, tolls, maintenance, commuter fares, etc.

  • Child care — day care, tuition and fees

  • Debt payments and other obligations — credit card payments, personal loans and life Insurance

15% should go to retirement savings.

5% should go to an emergency fund (until you have up to 6 months’ expenses saved up).

If you’ve been disciplined, and you stick to the above every month, then the remaining 30% is for fun – enjoy!

The Money Show’s Bruce Whitfield interviewed Galileo Capital Personal Financial Advisor Warren Ingram about the “50/15/5” savings plan.

For more detail; listen to the interview in the audio below.

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