Part 4/7:
Calculating the Monthly Budget
To effectively manage investment priorities while living expenses are taken into account, the author uses a unique formula:
Available Expenses = Monthly Salary - Rent
Monthly Budget = Available Expenses - Fixed Cost Total - Investment Amount
This formula leads to a calculated monthly budget of £720, allocated for discretionary spending. Notably, food is included in this budget as the author feels capable of adjusting food expenditures based on monthly needs.
Balancing Needs, Wants, and Goals
Contrary to popular budgeting methods such as the 50/30/20 rule—which advocates for allocating 50% of income on needs, 30% on wants, and 20% on savings or goals—the author favors a more tailored approach.