All of us want to improve our lives, buy the things that we want, provide the needs of our loved ones and most of all retire with a worry-free life. That is the very reason why we work hard in order to achieve these goals. Unfortunately, working just hard without a credible strategy will only result in failure and unrealized goals.
As you work through your goals, you soon realize that the money that you earn is just enough to cover your expenses and only have a spare for savings. This kind of scenario will lead you to think that you are not earning enough, and you want to increase your income. The mainstream solution is to either target a promotion or get another job. However, just increasing your income without changing your mindset will only lead to the same thing. Truth be told that an increase in income will also increase your expenses. (I've learned that from experience ^_^)
So how are you going to set yourself free from this vicious cycle? Well, try this formula that personally works for me, The 70-20-10 formula. First of all, in order for you to follow this kind of method, you need first to condition your mind regarding on how to handle money. Second is the feasible time frame of when you want to achieve your goals and Third is the commitment to focus on your goals.
What is the 70-20-10 formula?
This is basically dividing your income into 3 parts. 70% for your expenses, 20% for your savings and 10% for your tithes. There are many variations of this formula, you can tweak the percentage as you go along with it. But for starters, this is the best or ideal set up. To put this into perspective, please check the examples below:
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| "Savings" (CC BY 2.0) by Tax Credits |
Monthly Net Income: Php 16000Bi-Monthly Income: Php 8000Formula 1: 70%Formula 2: 20%Formula 3: 10%
Monthly Breakdown70% of Php 16000 = Php 1120020% of Php 16000 = Php 320010% of Php 16000 = Php 1600
Bi-Monthly Breakdown70% of Php 8000 = Php 560020% of Php 8000 = Php 160010% of Php 8000 = Php 800
Bi-Monthly Breakdown (Tweaked)85% of Php 8000 = Php 680010% of Php 8000 = Php 8005% of Php 8000 = Php 400
Let us say you have a bi-monthly net income of Php 8000. You just need to divide this amount into 3 parts using the 70% - 20% - 10% formula which is Php 5600, Php 1600 and Php 800 respectively. The 70% part will cover your expenses until your next payday, 20% goes to your savings and 10% goes to you tithes/donations. I know this will be a hard formula to follow for a beginner especially if you're splurging every payday. As I said earlier, you need to change your mindset, your time perspective, and commitment in order for this formula to be effective. If the formula percentage is hard for you to follow, you can tweak it to match your personal taste. What is most important here is you must not give up any of these parts, make the Saving and Tithing part your second nature.
Now you must be questioning. Why should I be giving tithes? Can I just put it to my savings or add to my expenses? Well, if you are a bible believer then you might have read it somewhere regarding this topic (Click Here). But, what if you tell me that you don't believe in the bible and you're not into religion. Are you exempt from this part of the formula? The truth is, your still NOT. Why? Because tithing is not generally giving a part of your money to the church. It is the act of giving without expecting any return, it will help you adjust your mindset regarding money and it is always a good feeling to help others.
“Everyone gets help from someone else at some point in their lives. So someday, you should help someone too. ” - Suzuha Amane (Steins;Gate)
Try this for at least 3 months and change the formula percentage if you are comfortable and in no time, you'll just be surprised at how much you've already saved. But always remember that saving part of your income is a difficult task. Temptations will creep on you when you look at your bank account. You might fail several times and might be thinking of giving up. Just think about your goals when you reach this point.
Do you want to have a worry-free life when you retire?
OR
Do you want to be a burden to your sons or daughters when you retire?
You choose... it's your life in perspective...
