As we are well into the New Year now is a good time to look at your budget and review your finances for the coming year. Budgeting will help you understand if you are living within your means or it can help you make your money work harder for you. It’s a great way to track overspending and get a handle on your expenses. We recommend you review your budget 3 to 4 times a year, or more frequently if money is tight.
When reviewing your spending, one of the simplest rules you can adopt is the 50 / 30 / 20 budget rule which is a good guideline. It works by splitting your after-tax income into three categories as below.
- Essential Spending
Allocate 50% of your income to your essential needs – your fixed costs – such as your rent/mortgage, groceries, transportation and utility bills.
- Discretionary Spending
Use 30% of your income on your non-essentials – your variable costs. For example, items such as takeaway coffees, dining out, gym membership and subscription services.
- Savings
Save 20% of your income to savings including emergency savings as well as your retirement plan. Savings can also include clearing debt. So if you make €3,000 a month after tax, this would mean you can put aside €600 a month. In just a year, you’ll have saved €7,200.
Recently we reviewed a clients’ spending habits using this rule of thumb as a guideline. Although on a modest income they were saving 35% of their net income to their savings. Being intentional with how they spend and save their money is helping them to work towards their goals – both short and long term.
Below find our top three Apps that will help you track your spending!
- Revolut
- Spendee (very useful as it can be synced with Bank of Ireland, AIB, PTSB and Revolut)
- You Need a Budget (YNAB)
If you need help putting your own Financial Plan in place, contact Grainne on 061-412388, or by email on grainne@sunrisefinancialplanning.ie.
Sunrise Financial Planning is regulated by the Central Bank of Ireland.
