Well, for some people, the answer is basically none. The only way to quiet those savings demons is by sitting at home in front of the TV, living on pasta and sauce, and only leaving to go to work.
You can’t live like this, people. You see, 99% of people will break, and the form this breakage will take will be some kind of spending frenzy, and you’ll undo all of your hard work.
So what to do?
Well, you have a couple of options:
- Save a certain percentage of what you earn. The 50/30/20 rule seems to be very popular, where you spend 50% of your income on essential expenses, 30% on whatever the hell you want, and save 20%. At first, I kind of thought that was a bit ridiculous – 30% seemed too high. Actually though, when you include things like eating out and subscriptions to things like Tailwind and our Cineworld cards, it’s probs about right. Sometimes I’m more inclined to save 30% and spend 20%, but I have a low income relative to my high saving goal, which sucks, but there you go.
- Save a certain amount each time you get paid. This is probably best if you have a very specific amount to want to save by a certain time because there won’t be any variation in the amount you spend. I err towards this method, but if I work more, I save the excess too. This means that whilst the amount I save is always either the same or more than I intended, the amount I spend can fluctuate. If I’ve worked less I save the same amount but I have less money to spend. Are we all on the same page here?
Ok, so now I know how much I can spend, now what?
The issue I had with spending money is what I can include. I thought of it as being limited to frivolous whims, like a quick Superdrug haul (I’ve had to stop those – read about that here) or a new handbag.
It’s everything that isn’t essential. I’m talking:
- Eating out – unless you include that in your grocery budget. We use our leftover grocery money for meals out and if we don’t have enough we supplement it with spending money.
- Any hobbies. Even blogging I’m afraid, so your hosting fees, Tailwind etc. Obvs if you make money with your blog you should use that for your expenses. I make a little extra money on Textbroker, which I use to pay for hosting fees and stuff. Don’t get yourself into debt before you’ve started your side hustle if at all possible. Try to supplement your income if you can OR explore low-cost ways of doing things.
- Skincare, makeup, clothing. These are not essential. Sorry. If these are weaknesses of yours, set up a sinking fund – that way you can still have your designer clothes and high-end makeup, but you’ll have to save up, rather than either whack it on a credit card or force yourself to live on rice and water for a month or two.
- Petrol – unless it’s for work. Work out exactly how much you need to spend on fuel for work and then put that into your ‘essentials’ budget. You’ll have fork out the rest from your spending money, I’m afraid. It sounds harsh, but say you’ve worked your arse off to save up £200 to go clothes shopping. You don’t want to ruin that by forgetting to factor in that £10 in petrol, £10 on coffees and breakfast, £40 on dinner…. If you save up for an extra month, you can have an amazing day, without buyers remorse, or that horrible sinking feeling you get when you’ve had a lovely day but you know you’ve overspent. You feel me? Alternatively, you could spend your £200 online, and not spend a single extra penny. It’s up to you really – I do my clothes shopping online, but if I’m fancying Ikea (which is an hour and a half away) I like to have a proper day out with breakfast and dinner and coffee and probably cinema. Basically, you do you (but budget for everything).
Two spending accounts…
I personally find it easier to have 2 funds: one for non-essential-but-essential-to-me things – makeup, skincare and blog stuff that I know I’m going to buy and another (small one) for just general crap – snacks when I’m out and the odd stationary binge. I may also have a third on the go if I’m planning an Ikea trip.
Savings plans can be a bit of trial and error, but remember that they’re not meant to be limiting you – they’re there to help you buy the things you want without you having to go into debt or have your electricity switched off. Yes, it may be a hard lesson in delayed gratification (not my strong suit, I assure you, but I’m getting better).
Keeping a spending diary for a couple of weeks is a great way of working out where your money goes and will help you draw up a realistic spendings plan. This is just as important (if not more so) than a savings plan, and the two of them should work together to help you manage your finances like an absolute boss.