TRY A PERCENTAGE-BASED BUDGET

One very simple and easy-to-follow budgeting style is percentage-based budgeting. But before we get into who a percentagebased budget is best suited for, let’s take a look at how this type of budget works.

Simply put, this is how percentage-based budgets work. You earn a certain amount of money each month. You set percentage targets for how to divide that money up toward your current expenses, savings, debt repayments, nonessentials or anything fun, and any other category that’s vital to you.

What does a percentage-based budget look like?

One very common example of percentage-based budgeting is the 60/20/20 budget, in which 60 per cent of your income is devoted to necessary expenses, 20 per cent is devoted to savings and the remaining 20 per cent can be spent on nonessentials.

However, that’s just one example though. “You can break up your income in any way that works for you. The key is to prioritise your expenses (including debt repayment) while still leaving something for yourself,” explained Terence Morgan, a New Zealand-based financial planner.

For example, say you have a monthly net income of Dh5,000. You allocate:

■ Dh1,000 for rent

■ Dh500 for groceries

■ Dh300 for utilities

■ Dh200 for Internet and cell phone service

■ Dh300 for miscellaneous fun activities

■ Dh200 for debt repayment

■ Dh500 for savings

Altogether, that’s Dh3,000 that’s going towards bills and savings combined each month. That represents 60 per cent of your income. The question is, what are you doing with the other 40 per cent?