Lesson 1: Budgeting That Actually Works - Cheat Sheet
The 50/30/20 Framework
- 50% for Needs: Housing, utilities, groceries, transport, minimum debt payments
- 30% for Wants: Dining out, entertainment, hobbies, subscriptions, non-essential shopping
- 20% for Savings/Debt: Emergency fund, additional debt payments, investments
Budgeting Methods Comparison
Method | Best For | Pros | Cons |
Zero-Based Budget | Detail-oriented people | Complete control, nothing overlooked | Time-intensive, requires regular updates |
50/30/20 Budget | Beginners, flexibility-seekers | Simple, flexible within categories | Less detailed tracking |
Envelope System | Overspenders, cash users | Physical awareness of spending | Doesn’t work well for online spending |
Anti-Budget | Consistent savers | Minimal maintenance | Requires discipline, less awareness |
Values-Based Budget | Those seeking meaning | Aligns spending with priorities | Requires deep self-knowledge |
Common Budget-Busters
- Forgetting irregular expenses (annual subscriptions, car maintenance)
- Unrealistic food budgets (too restrictive)
- No buffer for unexpected expenses
- Too many detailed categories (leading to abandonment)
- Not adjusting for seasonal changes
Budget Troubleshooting Guide
- Problem: Consistently overspending in a category Solution: Increase allocation or find specific cuts
- Problem: Budget feels too restrictive Solution: Add “fun money” category with no questions asked
- Problem: Partner not on board Solution: Start with joint goals, separate “personal” spending
- Problem: Unexpected expenses derailing budget Solution: Create sinking funds for irregular expenses
- Problem: Too complicated to maintain Solution: Simplify categories, automate tracking
Quick Formulas
- Savings Rate: (Amount Saved Ă· After-Tax Income) Ă— 100
- Needs Percentage: (Needs Spending Ă· After-Tax Income) Ă— 100
- Debt-to-Income Ratio: (Monthly Debt Payments Ă· Gross Monthly Income) Ă— 100
Digital Tools
- Budgeting Apps: Money Dashboard, Emma, YNAB, Monzo, Starling
- Spreadsheet Templates: Google Sheets, Microsoft Excel
- Automation Tools: Standing orders, direct debits, round-up features
Budget Review Questions
- Did I stay within my overall spending plan?
- Which categories were over/under budget and why?
- Does my spending align with my stated priorities?
- What unexpected expenses occurred and how can I plan better?
- What adjustments should I make for next month?