|Posted on 4 October, 2018 at 14:00|
Today’s Topic: Organizing Income.
“Do not save what is left after spending, but spend what is left after saving.” - Warren Buffett
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Putting money aside on a monthly basis for emergencies and for the future is very important. Doing this puts us in control of our financial situation. If we do not have savings we often borrow when an emergency comes up. Those who do not save are usually indebted to those who do.
One way to ensure that you can save first is to make more than you spend. This allows us to structure our money, and plan for the future much more easily, because it gives us that room to save, and invest, and deal with emergencies along the way. Making more than we spend every month is the first step to wealth building.
Budgeting, and planning your cash flow - having discipline with your dollars - is a great way to ensure that we make more than we spend. Here is a helpful guideline to ensure that we can make more than we spend every month and have plenty of room for saving, for sharing with others, and taking care of our monthly needs.
The Goal (based on net income)
10% or more: For others
10% or more: Savings
30% or less: Housing Costs - includes mortgage payments, house Insurance, property tax.
25% or less: Daily Living - includes entertainment, eating out, hobbies, travel, clothing, gifts, infant needs, pet bills, personal care, etc.
25% or less: Everything Else - includes maintenance, phones, TV, internet, gas, parking, insurances, debt payments, investments.
These percentages are the goal. If you haven’t been saving anything yet, don’t worry too much. The key is to start. Maybe start with 1% until you hardly notice it and then increase it.