Hi! JJ Childers here. In today’s episode of Monday Mentor, I’ll be continuing our discussion of Money Saving Strategies. Last week, I mentioned that you need a plan to maximize your money saving strategies. Today, I’ll be discussing this plan in more detail.
But first, do you know how to distinguish between your “needs” and your “wants”? Learning to differentiate between the two is the all-important key to maximizing your wealth-building and money-saving strategies.
For example, do you actually need or just want to buy a particular product or service? “Needs” are things that sustain you such as food, clothing, shelter, and transportation.
In contrast, “wants” are goods that enhance and probably improve the quality of your family’s life. To cite an example, you need clothes to keep you warm and to protect you from the elements but buying a designer wardrobe to look stylish is a want.
Now I’m going to show you how to set up a monthly expense plan. It’s popularly known as the “60:40 Rule”. When you receive your monthly paycheck, you should do the following:
60% - Reserve 60% of your monthly paycheck to paying off all household-related expenses such as groceries, rent, utilities, transportation, clothing, etc.
You then divide the remaining 40% as follows:
10% - Budget 10% for your retirement savings. You’ll need this money when you’re unable to work anymore.
10% - Set aside 10% for long-term savings in case of an emergency and you need to get your hands on some cash fast.
10% - Another 10% of your paycheck should be budgeted for short-term savings. You need this money for some unexpected expenses such as credit card bills.
10% - The remaining 10% is your “Do whatever feels good” money. Give your family and yourself a treat for a job well done.
Who ever said that saving money shouldn’t be fun? But you’ll have to find out which plan works best for your family. It would be pointless to set a target and your family would only have a hard time achieving it. Be realistic.
Get your spouse and kids involved in the planning and implementation. This will teach them to be responsible and make them feel part and parcel of your family’s welfare and well being.
