No one likes a budget because it sounds too much like a diet for your finances and conjures up visions of lack. Instead of using the ‘B’ word, we focus on a proactive Spending Plan. It is a habit that you will form to make concise and well-informed decisions about where your money goes.
The plan is a simple and yet a very powerful one. If you can commit to doing this, you will have set yourself up for financial success and you will be in total control. The moment a paycheck or other income clears into your primary bank account, you–the savvy financial controller of those funds–shall commit to doing the following:
- Immediately transfer 10% to an untouchable savings/investment account. This is the principal of paying yourself first and is a crucial step in building wealth. This money should be earning interest and working for you.
- Write a check to your favorite charity(ies) for 10% of the funds received. You’ll feel great that you can make a contribution to others.
- Pay your bills with 65% of your earnings.
- 10% goes to your emergency account, best set up in an interest-bearing Money Market account so it is easily accessible (only in a real emergency; not because you just got to have those new designer sunglasses!). At a minimum, you need to set aside at least 3-6 months of living expenses.
- Spend 5% on yourself and your loved ones just because you deserve it!
Now if this all sounds nice, but the 65% just doesn’t quite cover the bills, you are likely an over spender. You have gotten into the habit of spending more than you can afford to. If you ever want to get ahead and build lasting wealth, then you need to stop the cycle of overspending right away.
Come back and visit regularly… we’ll help you continue moving toward building lasting wealth.
Mark “Gunny” Thomas