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For most people budgets, like diets, are about deprivation.  And that’s why neither work in a lot of cases. But it doesn’t have to be that way. As a financial adviser, I discovered that there are two great truths about budgeting.

Sherpa’s two truths about Budgeting:

  • You can’t out earn bad spending habits

  • When a budget is in tune with your values, it is liberating and sustainable

Kate Moss, the model, is famous for saying you have to want to be skinny more than you want chocolate cake. “Nothing tastes as good as skinny feels”. Although I don’t recommend the Kate Moss diet, she hit the nail on the head. What Kate means is that if you know what really matters to you, and your daily diet aligns with that, then it’s easy to reach your goal. Same goes for budgets.

I prefer to think of a budget as a spending plan. Attitude is everything; if you think of your budget this way, it really is about freedom:

How can I spend what I’ve got and achieve what I really want?


The core benefit of a budget is that it creates boundaries which free you to focus on what’s essential. These days, many of us suffer from ‘choice overload’ which can lead to stress and procrastination. A well-constructed spending plan is like a protective financial bubble that simplifies your daily choices and alleviates stress.


Despite the fact that we spend more time in formal education than our parents did, most of us still don’t know what healthy spending looks like. We are surrounded by media which delivers a false impression of what is realistic for most.

Follow the 50/30/20 rule:

  • 50% of your take home pay (maximum) should go to CHORE spending - the stuff you spend but doesn't give you any particular pleasure when you spend it. You notice these things only by their absence. I call these SURVIVE expenses. They include housing, utilities, food, insurance and transport.

  • 30% or more of your pay should go to stuff that makes you feel good.  I call these LIVE expenses and they include looking good, feeling good, going out, and entertainment.

  • 20% or more should go towards your goals.  I call these GROW expenses and they include paying off your debts, saving for big items you will buy in future years, preparing for retirement or saving for, and paying off your home.

I learnt this rule from my father, who learnt it from his father.  The 50/30/20 Rule has stood the test of time and it works all over the world. It was made popular in the early 1990’s by US Senator Elizabeth Warren and her daughter Amelia in their book All Your Worth.  It works because it is simple, powerful and achieves balance between the demands on our income.

If you allocate 20% of your pay to goals first,  you will feel like you are moving ahead, without placing too much strain on your spending. If you keep your fixed (SURVIVE) costs to 50% or less, you have more room for fun stuff.

Step 3: Tailor for your specific situation

The 50/30/20 rule is a goal, from time to time it will vary. For example, if you still live with your parents and you’re still paying off student debts, you will probably allocate more to LIVE and GROW. First home buyers in city areas may allocate more to SURVIVE as mortgage payments in the early days of your loan and other home expenses may be higher, so it can take a while for pay rises to reduce mortgage payments (as a proportion of your income). New parents may have a softer focus on long term goals while income is low during maternity leave.

A great budget is one that leaves you feeling great, and importantly, empowered. When you think of your budget as a tool to help you get what you really want, deprivation gives way to empowerment. And best of all, you’re on the way to living the life you want with the money you have. Now go put that budget to work.

Vince Scully


With over 25 years in Financial Services from consulting to management, Vince Scully is the go-to guy for wealth management and financial advice. Vince founded the Calliva Group; a fund manager, product issuer, advisor and lender to Government and private clients. Vince is an advisor to the Wealth Management Industry, and prior to his role as CEO at Calliva, a senior member of Macquarie bank’s infrastructure team.

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