Nationwide is encouraging people to adopt the “50-30-20” rule as a simple way to build savings and save money. The approach starts with understanding exactly how much you earn and where your money goes.
Experts at Nationwide recommend creating a clear budget plan, with the 50-30-20 rule offering a useful start. Under this method, your monthly income is divided into three categories – musts, wants and bills – helping you manage your money more effectively.
50% on musts – your fixed outgoings and essential living expenses
30% on wants – your day-to-day spending and the things you enjoy
20% on savings or debt – paying more than your minimum payments or putting money into a savings account, pot, ISA or investment
Giving an example of how it could look if your monthly income, after tax and other deductions, is £1,500, it notes that this rule could mean you put £750 on needs, £450 on wants and £300 on savings or debts. If this is not possible, it says: “The 50-30-20 rule is just an example. You can split in any way to meet your needs.”
List your outgoings
To stay on track, it’s important to map out all your spending. That means noting down every expense, including smaller extras like impulse buys or social costs such as meals out.
A useful tip is to look back over the last three months of your spending. Reviewing recent transactions can help highlight patterns as well as any one-off costs, giving you a clearer picture of what a typical month looks like and making your budget more accurate.
Bills to think about
Rent or mortgage
Water, gas and electric bills
Childcare
Car payments
Council Tax
Home insurance
Contents insurance
Car insurance
Phone bill
Travel, such as to work or holiday costs
Essentials
Car payments
Petrol
Basic toiletries
Food
Prescriptions
Subscriptions like Netflix, Spotify, YouTube, Amazon Prime, HayU, Apple TV and Disney+
Eating out
Personal treats
Hobbies
Debt
Phone bill
Memberships like the gym or the cinema
You may also want to consider any longer-term savings such as:
Do I need to give up my daily coffee?
If money is tight, cutting back on non-essentials like a daily coffee, streaming subscriptions or eating out can help ease the pressure. However, Nationwide says that “if giving up your Spotify subscription or Friday coffee will make you unhappy, maybe keep them. It’s about balance and cutting back on things you feel you can give up comfortably”.
Spend less in one area
In its final piece of advice, it suggests: “Setting a goal to try and reduce your spending in something you think you can cut back on, like eating out, can help you see extra money stay in your account.
“Creating small challenges like this can help you to stay active with your budget plan. It encourages you to track your spending, making you focus on the bigger picture too.”
For more money-saving tips, you can read their full tips here. You can also read a range of financial advice here.
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