Many of us would have heard of the “Income – Expenses = Savings” approach to personal finances, but merely allocating the remaining amount of your income to savings will not help you reach your financial goals efficiently. We’d like to introduce you to the 20-80 budgeting rule!
20/80 Budgeting Rule
80% Needs / Wants
- 50% for needs: Bills, insurance, groceries.
- 50% for wants: Shopping, Entertainment.
20% Savings
- Deposited into high interest savings account.
Commit to savings first
Commitment is one of the key factors to successfully save and manage your money. Instead of only saving what’s left at the end of each month, be intentional and set aside 20% of your income at the start of the month to your ING Save account. This simple yet effective budgeting method ensures that you prioritize your savings and leave it to grow with 2.5% p.a. interest rate.
Maximize what you can spend
The remaining 80% of your income can be spent on your needs and wants. You can allocate this fund into 50% for needs such bills and groceries, and 30% for wants – to shop and for entertainment. This dedicated allocation allows you to focus on the essential things and minimize spending on the things that are optional.
One way you can prevent overspending is to separate this fixed spending amount into your ING Pay account. ING Pay allows you to take care of your bills and transfer funds where you need them with no transaction fees. You also get a virtual debit card for online purchases and can request for a free physical debit card so you can conveniently use it to withdraw cash at any local BancNet ATMs or pay at shops and restaurants.
Importance of budgeting
Of course, this is just a recommendation to start budgeting smart. At the end of the day, it ultimately depends on your financial situation and goals. If you can commit more than 20% to your savings, that would be even better! If you wish to commit more to your needs than wants once in a while, that is fine too. But for those who have just started earning an income, this would be a great system to follow so that you can cultivate the habit of budgeting. Over time, you can always adjust the saving and spending proportions to suit your needs.
