Nationwide has recommended a straightforward budgeting technique known as the '50-30-20 rule' to help UK households manage their finances and boost savings. The building society's website features a page called 'How to Budget' that explains this approach, which divides expenditure into 'musts', 'wants', and 'savings'.
The first step involves working out your net income, including take-home pay, benefits, share dividends, and income from other sources. Self-employed individuals should base this on average monthly earnings. Next, you need to determine your outgoings by compiling a comprehensive list of all expenses, such as bills, subscriptions, mortgage or rent payments, and even impulse buys or social activities.
Using the 50-30-20 rule, you then categorise your spending: 50% of your income goes to 'musts' (essential costs), 30% to 'wants' (non-essential items), and 20% to savings. Nationwide says this is a 'great way' to plan spending, but adds that you don't need to stick rigidly to these percentages if they don't suit your circumstances. You can adjust the split to meet your needs.
Nationwide emphasises that creating a budget should be personal to you, helping you decide what to spend and where to cut back. The goal is to enjoy the things you love while living within your means. If the budget isn't achievable every month, it may be useful to adjust it.
