How do you split your salary?

[SpottyBlueTeacup]

Hi,
I’m on my own now - with two teens (one stays at their dad’s half the week) - so wondering about changing the way I budget. I have a decent salary so no worries there and, at the moment, mortgage free.

I was thinking of splitting my salary 3 ways (with equal amounts) each month so:
(1) bills
(2) everyday living costs/school dinners/bus fares
(3) savings

Then, anything left in 1 and 2 at the end of each month could be transferred to savings. Does anyone else do this?

1. Allocate to savings/investments.
2. Bills.
3. Food and other essentials.
4. Non-essentials.

Budget in advance, so you have pots of money for different categories... some banks let you create these pots online and take money out of different pots depending on what you buy.

By making savings the first thing, you will then do it. Try to increase it every few months, till you get to a point where it hurts, then step back a notch. If you have savings last, from what is left over, then there often won't be any left over.

I'm not sure how such an arbitrary split would be practical or assist in budgeting to be honest. Bills are mainly fixed or at least roughly the same amount.

To me it makes much more sense to:

• Add up all your regular bills, adding an extra buffer to ensure an unexpectedly higher variable bill, like a phone bill, would be covered. Keep this ring fenced in an account from which all your bills are paid and use a different account/card for spending.

• Out of what's left, set a realistic budget for the month, again with an added variance for the unexpected. Anything left at the end, sweep to savings.

• Save the remainer after bills and living expenses are accounted for. Put this in a savings account and keep it separate from your budget.

Regarding paying savings first - I know this is a common suggestion but it's never really worked for me because life gets in the way. I pay into savings regularly but the amount is hugely variable. In April, I get an annual bonus - a couple of treats but can chuck £3k in savings in one month. One off expenses, trips etc - monthly savings vary from £100 - £1000 a month.
In August, zero saved - £500 school uniform and holiday spends, it all goes.

budget planner

I always find this budget planner useful, as it makes you think about everyday, and less frequent expenditure. I use it tool to see how much I would need on a weekly basis, and how much money I need to save for less frequent expenditure. When the kids were younger, I would literally draw out an extra £50 (?) per week, and put it in different envelopes I would have cash saved up for school uniforms, Christmas, holidays, birthdays etc (or you could set up a new bank account for these expenditures, and automatically transfer money each month). It’s surprisingly how much haircuts, kids clubs fees etc all mount up.

^Regarding paying savings first - I know this is a common suggestion but it's never really worked for me because life gets in the way. I pay into savings regularly but the amount is hugely variable. In April, I get an annual bonus - a couple of treats but can chuck £3k in savings in one month. One off expenses, trips etc - monthly savings vary from £100 - £1000 a month.
In August, zero saved - £500 school uniform and holiday spends, it all goes^

I think the aim is to get into a position where you've already saved up the money for those sorts of things before you need to spend it. Obviously you can't get there straight away, so it's something you need to build up to.

For example, you should be thinking about the cost of next summer's holiday and big school uniform replacement now and put money aside for each month from now on. Likewise Christmas, car insurance, servicing, MOT, repairs etc.

It's also important to recognise the difference between short and long term savings and those that have a defined purpose and those which are truely spare money.

For example, money saved for school uniforms, holidays, car stuff, Christmas etc, isn't really savings, it's more like a cashflow management exercise, you know you will need to spend it over the next few months, so it doesn't build up like real savings do, where the pot increases over time and you will be paying in without taking out, for years to come.

OP, your plan looks quite good, especially if you can cover some or all of normal ups and downs in outgoings (like Christmas, holidays, car MOT, insurance MOT etc) without dipping into your saving too much? Because out of savings, you've also got to account for any major household costs like a new roof, boiler etc, and car replacement, plus saving for loss of income or retirement.

Perhaps earmark some of the savings as short term savings/cashflow and others as longer term savings that you don't exepect to spend on anything except bigger purchases, illness, job loss or as part of your retirement income?

I put savings in on pay day rather than what’s left. That way I’m far less likely to take it out again. I’d have saved less if I did it the other way. I also put £250 a month aside for birthdays and Xmas (and car MOT etc). Then just transfer what’s needed each month, means the cost is spread across the year, that helps a lot

I've been reading about the 50:30:20 split.

50% bills and essentials
30% discretionary spend
20% savings

@moonlight1705

I've been reading about the 50:30:20 split.

50% bills and essentials
30% discretionary spend
20% savings

That’s starting the wrong way round for me. I don’t take 50% of my salary and take out bill commitments to match it. I work out my bills, what that leaves me - and then whether I’ve committed to too much.

OP, you say you have a good salary and no mortgage - what’s your pension situation? I’d be like looking at maximising tax relief.

My % of take home is:
25% bills and essentials
25% discretionary spends
50% pension

I really need to split my money and allocate so much for non-essential things. I’m terrible for eating out! If I had a budget and put a set amount in savings I’d know not to touch that.
I have an NHS pension (since 1996) but that is now going to be included in the divorce settlement. I won’t lose out there as I was part time for 10 years.

As for the splitting of the salary, that's a very important component of having an active-daily life activity as well as a calmly life,not to be worried about loans which are not paid on time, but let's take a better overview where the rest of the salary which remains after paying the bills and loans, would not be spent, but invested,that is an important idea which the playlouder.com has learnt me, hence, I am able to control better my money, I know how to create money from the money, I know it sounds bizarre, but that's how the majority of firms related to banking and finance work. Good job to those guys who wrote the article!