Budgeting to Save Money - Are You Doing it the Right Way?

Budgeting is an organized way to manage your spending and saving the cash too. For most of the people, the idea of tracking and regimenting your spending seems an overwhelming and tedious task. However, if you are planning to get your money in order, you will have to go through this tiresome job and learn to organize your finance by using the 50 - 30 - 20 rule.
The rule is simple and the best way to spend your cash. For that, you need to divide your expenses into three main spending categories and follow the 50 - 30 - 20 rule to reach your financial goals such as buying a house in Pakistan, without having to stress over money minutiae.

See Your Take Home Money

For a salaried person, it is easy to think about the exact amount that he takes home after paying taxes and other deductions. Once you have the exact figure in mind, start dividing it under the respective heads.

Limit Your Needs to 50%

When you get a paycheque, it is easy to get carried away in emotions - which usually end up at over-spending at several places. Before planning about your spending, take a minute to think about your financial responsibilities. According to this rule, your needs or essential spending including rent, fuel, groceries, insurance, and utility bills should only add up to a maximum of 50% of your take home salary. Instead of being emotional just write down the things that you can't live without. For instance, if you do not pay rent, you may have to face consequences from landlord, fuel is also considered a need, without which you can't reach anywhere and eating is also your need so you cannot skip grocery.

Limit Your Wants to 30%

Under this head there comes the things, where you can be flexible in spending. You may get excited at the chunk but remember, it is not as handsome amount as the figure sounds. However, you must be sure what comes into wants such as trip to Switzerland does not fall in "Wants". This and several other things account for another category. These are the things that fall outside of your immediate needs such as your telephone bill, your internet device bill, your online orders' cost and the outing bills. Your credit card bill also counts in, if you have any. Interestingly, the extra pair of jeans and boots are not considered in needs. Now when you know the things that count in "Wants", 30% may not sound a generous chunk. Thinking about what you are spending on versus what you should actually be spending can keep you on track.

Save the 20%

Once you are done calculating the first 80% of your income, you are left with the last 20%. This amount should either be saved or used to repay your debt in order to make you worry free about your future. Pakistan real estate experts suggest that at first; you should focus on saving money in an emergency fund then put money towards a house down payment or paying off debt. On the contrary, if you have all the things under control, you can save this money to fulfil your future goals including buying a home, starting a family or starting a business. Remember, if you are able to cut down on your needs and wants category, you can save more than 20%, which can add up quickly.