“Some people find that it’s not possible to get all essentials into the 50% bracket, especially if they’re living in a central city,” says Selina. The increased cost of energy and groceries may also mean that essentials come to considerably more than 50% and that saving 20% simply isn’t possible.
Essentials versus non-essentials
To put the 50/30/20 method into action, you’ll need to look at what you usually spend and decide what’s essential and what’s non-essential.
“What do you need to live in your home, be fed, watered and clothed and feel financially secure? What could you live without? What couldn’t you live without?” asks financial planner and coach Catherine Morgan.
If you bank with Starling, you can use our free AI Spending Insights bar to help figure out how much you usually spend on groceries or going out. You can then note down various expenses in a spreadsheet or document so that you can categorise them into ‘needs’, ‘wants’ and savings. This will give you a clear idea of whether the 50/30/20 split could work for you – and if you need to adjust it or try a different method.
Alternative budgeting methods
The digital envelope method
If you’re looking for a budgeting method with no set percentages and more categories than ‘needs’, ‘wants’ and savings, you could try the envelope method.
“It comes from when people were paid cash-in-hand and would separate money out into different envelopes,” says Selina. “And it can work digitally if you have a bank like Starling with Spaces.”
Spaces is the feature in the Starling app that enables you to set money aside for particular purposes. For example: you could create Regular Spaces for your rent, utility bills, insurance, food, transport, and top up each Space with the amount you need to spend that month. You could then set up direct debits with the Bills Manager feature to pay bills directly from a Space.
You could also have Spaces for celebrations, coffee or takeaways and then set up virtual cards to spend straight from those Spaces using your digital wallet. You’ll only be able to spend what’s in your Space, which can help you stay in budget.
“I love Starling Spaces,” says Catherine. “You can bring everything to life with photographs and names.”
