Sketchy Finances? Revisit The Basic Rules

At Forty Five Budget RulesIf your paycheck is gone before it gets deposited you need to revisit the basic rules of finance. Something is out of line.

One rule is the 50/30/20 format. The theory is 50% of your income goes to housing and bills, 30% is allocated for wants and entertainment and 20% goes to savings, investments and paying off debt. It is a matter of balancing. For example, if you live in an expensive city and rent is taking up 70% of your income then you have to a) re-evaluate if can you live on the rest or b) look for solutions.

Another one is 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.  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, in the past, I would feel hopeless whenever I read these budgeting rules. I would feel desperate – with my income and debt load, there was no way I could afford to follow these guidelines.

Budget Rules At Forty FiveWhenever 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 on my credit cards which made it easier to pay off the debt. I started to control my spending. As I worked at it, I learned to make small changes 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 above but I am not there yet. I am also not going to stress out about it. I am happy as I am being proactive and doing the best I can.

If you would like to join me on the journey, check out my facebook group.

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Karen is profiled in our Celebrate Audacious Series

Karen Magill
Karen Magill Contributor
Karen was disabled by MS in 2000, took a 30% cut in pay, and went through a bankruptcy. Once she was able to get credit again, she found herself following the same spending path that got her into trouble but this time she caught herself. Now Karen guides women through the 5-step process she used to save herself over $400,000.00 in future credit card interest charges so they can pay their debt off faster, save money and focus on other goals to enrich their lives.
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