How to divide the household finances

We need to know where the money is coming from and going to the family budget.

Set the rules for dividing finances in the household. The rule of dividing income in the family budget according to the highest cost in the budget according to the 50 - 30 - 20 rule has proven its worth. The author of this rule is Elizabeth Warren and her daughter Amelia Warren Tyagi, who addressed the topic of personal finances in the book "All Your Worth: The Ultimate Lifetime Money Plan“.

50% of the family budget for mandatory expenses: rent or mortgage, energy and groceries, transport costs, communication services. Savings can also be made on these types of costs. We can take advantage of the opportunities that are offered to us: take food from home to work, use energy-saving electrical devices to save energy, save on transport by using public transport or combining different types of transport.

30% for travel, culture, clothing, drugstores and cosmetics: this part of the costs usually exceeds the household budget the most. It is therefore important to focus on it and evaluate what you can save on and what is beneficial for you. Savings can be made if your hobby will be comparing prices, looking for promotional offers of goods, your reconsidered demand for a number of pieces of clothing, shoes, cosmetics. I think it would do no harm to invest some of those funds in financial education.

20% saving and reserve creation: the success level of saving is based on the principle of setting aside 20% of your salary immediately. This is a long-term saving. If you start saving according to the rule “I am old enough to be responsible and now is the right time to build up a reasonable reserve from what I have saved”, you have got a trump card in your hands. Making a reserve is very important because it is about your future and the reserve serves to bridge an adverse period of at least 3 to 6 months' salary, so it will serve you very well in unexpected financial situations that life brings.

One final piece of advice: You know that saying our parents and grandparents used to tell us about? Cover yourself with such a duvet as you can afford. Do not spend more money than you earn, consider and save. The success for you will be the money saved.

MSc. Zuzana Zvolenská, Debt Consultant