When you have competing demands for your money it can be hard to make good decisions about what to buy and how to spend. You may find it helps to put your expenses into Needs, Wants and Savings or Reducing debts.
These are the unavoidable costs that help to keep you and your loved ones safe, warm and fed. They include your mortgage or rent, food shopping, utilities, transport, as well as minimum payments on credit cards, loans and other borrowing. Remember to include any tax you owe, unless it has already been deducted from your salary by your employer.
These are all the things you spend money on that are not absolutely essential. They include meals out, going to the cinema, new clothes, gym membership, holidays and concert tickets.
Savings might be for emergencies, short-term goals (like a vacation) or longer-term plans (such as retirement). Reducing debts involves making payments above the required minimum to pay off your debt quicker.
When you make decisions that involve spending it’s a good idea to keep these 3 categories in mind. If you notice that you are spending too much in any single category, it could be an indicator that you need to adjust your spending habits.
In her book, All Your Worth: The Ultimate Lifetime Money Plan, Harvard bankruptcy expert Elizabeth Warren defined the "50/30/20 rule" for spending and saving. The principle is that you aim to spend 50% of your income after tax on needs, 30% on wants and 20% on savings and debts each month.
HSBC offers these articles for educational purposes only and they should not be considered professional or investment advice. While HSBC is pleased to offer these articles as an educational service to our customers, HSBC does not guarantee, warrant or recommend the opinion or advice or the product and/or services offered or mentioned in these articles. Any opinions, judgments, advice, statements, services, offers or other information presented within an article are those of a third party and not HSBC. For a comprehensive review of your personal finances, always consult with a tax or legal advisor. Neither HSBC, nor any of its representatives may give legal or tax advice.
HSBC has created the YourMoneyCounts financial wellness program which is presented by HSBC staff to the community in a classroom setting. Participant workbooks covering Budgeting, Credit, and Identity Theft and a budgeting worksheet are found through the YourMoneyCount link above. This program was created in partnership with the national nonprofit Greenpath Financial Wellness, and they provide free individualized support focused on your personal situation and financial wellness.
