Managing your money based on percentages opposed to being confined to a set number will boost your confidence and excitement as you begin to consistently achieve your goals month after month. On the other hand, if you spend less than 50% on your living essentials then you should allocate more funds to your financial goals. When you spend more than 50% then you have to decide if the extra funds will come from flexible spending or your financial goals. If you live in an area with a high cost of living then spending 50% on living essentials is likely unrealistic. The percentages should be adjusted based on your living essentials. And then finally, financial goals include saving, investing and waving bye to debt. Flexible spending covers everything from food and transportation to those lovely trips to ‘insert any store that you go in for two items and leave with ten.’ This would also include any last minute expenditures that come up such as gifts for birthdays and weddings. Living essentials include your basic necessities such as mortgage/rent, car note, insurance payments and utilities. When you’re ready to start your money management journey I highly recommend the 50/30/20 money management system: 50% of your monthly earnings is allocated to your living essentials, 30% is allocated to flexible spending and 20% is allocated towards your financial goals. Knowing how much you have to spend in total for the month will allow you to make easier, smarter decisions for your money because once the monthly allotment is gone, it’s gone! A money management plan breaks your money down into percentages and categories which gives you more flexibility to achieve and maintain your financial goals - especially when your lifestyle varies season to season or even month by month.
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