It pays to be financially responsible. If you have dreams to conquer and goals to achieve, then fine tuning your money management skills is a vital component. But that doesn’t mean eliminating all the sushi, holidays and the luxury splurges that make your heart sing every once in a while. In fact, it's a common myth that a budget equals no spending. And a restrictive budget? Well that’s no fun at all. So how do you strike the balance right so that you can be financially responsible whilst having fun along the way? We’ve rounded up the best ways to tread the line like a pro. It’s time to start telling your money where to go instead of wondering where on earth is went.
Setting up a budget
One of the core pillars of financial responsibility is having a budget. But not just any budget – a budget you can actually stick to. You should know how much is coming in, and where your money is going. With a 360 degree view of your finances for the month, you can confidently avoid overspending and build up your savings over time – all without painstakingly recording every single transaction. That starts with building a budget:
- Based on your values
- That allows you to spend your money the way you want
- That takes care of Future You
The 50/30/20 budgeting rule permits you to have fun
So how do you build a budget permitting for the fun stuff? We like the 50/30/20 rule for budgeting. That's because it's designed to allow spending money on having fun each month while at the same time prioritizing Future You. The 50/30/20 rule is a straightforward monthly budgeting method that tells you exactly how much to put towards your savings and your living costs each month.
When following the 50/30/20 rule you divide your budget into three categories:
- 50% of your income should go to necessities: This includes bills, transportation, housing, groceries, insurance. In other words, it is things you need to pay for.
- 30% of your income should go to fun: Because you need to have fun. You don’t actually need take-away sushi, but if you remove all the fun stuff, you’re definitely not going to stick to your budget.
- 20% of your income should go to Future You. This category includes savings, above minimum debt contributions, and investing.
Financial freedom is permitting yourself to have fun.
Want to get started? Is Excel not your forte? With our 50/30/20 budgeting template, we've made it easy for you to get started. All you have to do is insert your own numbers and we do all the calculations for you.
Become an intentional spender
If you want to become financially responsible, you need to be more mindful when it comes to your spending. Because there's one thing many of us are guilty of, it’s leading with our heart rather than our head when it comes to spending. And that's when the emotional and impulsive spender in you starts to show it's true colours. Yet if you have money goals you want to reach, tightening your boot straps and putting your mindful cap on is one of the most rewarding things for you and your bank account and can help you rack up significant amounts of wealth.
It all comes down to intentional spending. Ask yourself: “what's important to me?” Is it your daily latte, an expensive handbag, a holiday, boxing lessons or the 10 subscription services you’re forking out on? Once you get clear on the important things, consider factoring the things that make you happy into your budget, and eliminating the unnecessaries.
We all have different priorities, but getting clear on yours is key. You will need to cut down on other expenses on the list. That's part of intentional spending. You can't have it all if you want to achieve your goals.
Find cheaper alternatives for the fun stuff
Is the way you let your hair down proving to be more expensive than it should be? If this is the case, being financially responsible means sourcing cheaper alternatives. Let’s say you purchase a really expensive coffee every morning. Is there a coffee shop right next door that can do it cheaper? Or maybe you’re splurging on high-end clothing, but could look for shops that sell similar styles at a cheaper price point. This doesn’t mean cutting out the luxury stuff all together, but simply lowering the bar ever so slightly.
Have fun with friends and family in cheaper places
For many of us, being financially responsible needs to be balanced with our social life. But perhaps your social life is proving to be more costly than your financial goals permit. So why not consider having open and honest conversations with your friends, family and romantic partners? You can start by explaining that you have financial goals to conquer, and that you’d like to prioritise having fun in less expensive environments. You never know - they might be relieved! The chances are others are feeling the same way, which means you can start having fun cooking dinner together on a Friday night, rather than splurging on the luxury restaurant down the street. Both are fun!
Stick to your long-term goals – they’re fun too!
When we talk about being financially responsible, we’re talking about getting you on track for your long-term goals, which vary from person to person. Many of those long-term goals will revolve around having fun – travelling the world, saving for some luxury items, or organising a party for your 40th birthday bash. So isn’t it fun knowing that being tight by the bootstraps now will result in some fun later down the line?
There’s power in adopting this mindset when being financially responsible feels a bit boring. And whilst cutting back on certain things might make the process of saving for house deposit a bit boring in the short-term, remember that you’ll be having fun dancing in the kitchen you own in the long-term. Balance the short-term cuts with the long-term gains and watch your financial attitude flourish.