To execute the rule, Alice Haine, personal finance analyst at Bestinvest, said: “It can be as simple as writing down your outgoings on a piece of paper so that you know exactly how much money you need to pay your vital bills every month.
“Include the ‘must-have payments’ such as rent or mortgage costs, utility bills, council tax, insurance and food, car payments, commuting to work costs, phone and broadband, saving and investments, and so on.
“Then add in the ‘like-to-have payments’ such as going out, gadgets, holidays, subscriptions to streaming services or gym memberships. Add it all together and see how much you spend every month.”
Next, Ms Haine suggests people to deduct the figure from their net income (the amount they take home every month after paying taxes). This quickly reveals whether a person is spending within their means.
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