A Journey Toward Financial Literacy: Budgeting and Spending
By Ellen Vinde
Welcome to my exploration of the financial world. Together, we are about to embark on a journey to understanding how to survive in a capitalist society that seems stacked against us from birth (unless you’re born into a wealthy, privileged family). Through a series of articles, I plan to uncover and share the best strategies for gaining an edge in this rigged competition by learning the proper way to spend, invest, get financial protection and ask for what you deserve in the workplace.
My name is Ellen. I am a white woman (she/her) from Denmark. I moved to London at the age of 20, returned home to get a degree at 26, and then came back to London at 28. Living in London in my late 20s is significantly different from my early 20s. No longer being capable of going out four nights a week, I now prioritise my spending – and even my savings! Who have I become?
It's been a wild ride: I have gone from eating pasta and ketchup to being able to afford nights out on a below-minimum-wage paycheck; then from reducing nights out in favour of nice clothes and fancier drinks to now making more money and spending less. Truly horrifying thoughts like What if I want to buy property one day? have started to push their way into my head.
Is this a realistic goal for someone with no real savings, on an income of less than £25,000 a year? Is the system truly rigged against me, and those of you like me? I’ve gone down the rabbit hole of budgeting strategies, so you don’t have to. And here is what I’ve discovered:
Weekly Budget
My mum is the queen of budgets, so naturally, I went to her for advice. Even when my mum was a student and a single mum with two kids, she always managed to put food on the table and made sure that we never went without anything. Her biggest piece of advice is to make sure you have a weekly budget. Make a list of what you are eating every day of the week, make sure you make food that will last you a couple of days and don’t stray from the food schedule. This will keep your weekly spending to a minimum, and you’ll know at the beginning of each week how much money you’re spending on groceries.
Giving Every Penny a Job
Make sure that at the end of each week, or month if that suits you better, there is no penny left behind. Everything you haven’t used from your budget should be moved out of your spending account into savings, investments or put toward paying off debt. Even if it is just £5, put it away and start anew with your weekly budget or monthly pay.
The 50/30/20 Rule
Another strategy for personal budgeting is the 50/30/20 rule, which divides spending into three categories:
50% for Needs: Bills, groceries and essential expenses.
30% for Wants: Holidays, entertainment and personal desires.
20% for Savings: Money for the future.
Considering my income against the high cost of living in London, I was initially sceptical of this approach and decided to test it myself to see if it was possible to follow for someone in my circumstances. Implementing the 50/30/20 rule required careful planning and discipline. Here’s what I learned:
Needs (50%): This category is non-negotiable. It includes rent, utilities, groceries and essential transportation. Unfortunately, 50% of my income only just covers my rent and bills, so groceries had to come out of another pot.
Wants (30%): The 30% became my grocery spending money, but it also covered a small-ish weekly night out or one big monthly one. Groceries are technically something I want, so I didn’t mind this portion of my income being spent on this, but it made me look closer into my weekly spending on food; it might be a little too high.
Savings (20%): This part then became savings in a very broad sense of the word. I now have a savings account for clothes, travel, rainy days (unforeseen bills) and one account for actual savings. One account is for self-care; it gets less than the other accounts but goes toward occasional luxuries: nails, hair, massages… This account is my smallest – but also my favourite.
Conclusion
Budgeting and spending are definitely a journey, especially in an expensive city. By adopting and adapting the strategies I have mentioned, I am realising that there are more changes I need to implement to navigate my finances better and plan for a more secure future.
Stay tuned for more articles in this financial literacy series, where I will share various insights and practical advice on how to invest wisely, protect oneself financially and advocate for what we deserve in our professional lives.
We all deserve to thrive financially; let me help you take the first steps on that journey.