Tuesday, 22 January 2019

How Start Budgeting And Get Out Of Debt! The Simple Way

How Start Budgeting And Get Out Of Debt! The Simple Way

The first principle I'm going to teach you today in terms of whipping your wallet into shape and kick-starting your budget in a simple way is to help you know how much you should be spending. That's kind of the big questions it's like everybody's got different incomes, everybody lives in a different part of the world, Everybody has a different living situation so how can I say your budget should be this amount of dollar

I'm going to teach you a rule or a calculation or principle or whatever you want to call it. Whatever you are in your life whether it's feast or whether it's the famine or somewhere in between, we've been everywhere at this point that you know at the end of the day what your budget should be or what you should be living off of

Let Go Into The Article

70% Rule

I call this principle, it's 70% Rule. It's very simple when you get paid, you should be living off of no more than 70% of that, so 70% of your take-income is for spending or less. No matter what your paycheck is, what gets deposited into your account, 70% is what you should be living off of

This can be tricky, I have a friend who makes great money at his job he was making $80,000, but he is in debt, he has this balance on his credit card that he cannot pay off and at the end of the month he has no money left, where is the money gone, I sat on the phone with him for quite a while helped him cruncher numbers and figure it out

Come to find out he was living as if he was making $80,000, but he told me that he was making $80,000 but guess what, he wasn't, maybe that's what his tax statement says, maybe that's what his job offer says but at the end of the day what was being deposited into his account after taxes and withholdings, insurances and all these other things was really more like $60,000 and that's a big difference, 

When I talk about your income or money that goes into your bank account please keep in mind that this is after taxes withholding, from now on for the rest of your life your ultimate goal is that 70% or less, that money is what you use for your bills, your mortgage, medical expenses, your spending, travel, everything 70% or less

Quick disclaimer: There was a time in my life where that would have been physically impossible, my income was too small there's no way I could physically have lived off of 70% of my tiny income,

Keep in mind that, if that's your case and you cut out all the expenses that you can and it still can't get within that 70% then there's a point where your goal then needs to just be to increase your paycheck just like I did

There were several years things were really hard and scrappy and I made next to nothing but I had a long-term plan in mind and that plan was that over time my income would increase so that I could fit nicely in that 70%

There you go, your first budget is if you don't know how much your family should or shouldn't be spending, 70% of whatever you deposit is a good place to start 

Where does the other 30 go, I'll go over it really quickly because that's not my main purpose in this talk but you need to know, 20% is going to go into saving

70% is for spending 

20% goes into savings = split by 10%

10% into an emergency saving account

10% just goes into a normal family savings account

What I do and what I recommend is to take that 20% and split it in half and put 10% into an emergency saving account that you hopefully never touch, that it's just in case of a dire emergency

The other 10% just goes into a normal family savings account and that what you would use to save up for a down payment on a car or maybe you need a new bedroom set, you want to go on vacation, whatever it is

Hopefully the emergency account you never ever have to touch

70% for spending
20% for saving
The last 10% this kind of personal, I'm going to leave it blank

The 10% I tithe it to my church so you can do something in terms of donations or something philanthropic or for some people that's what they use for investing, retirement, children college education, you can decide for yourself 
But I will say this, 

If you have debt, maybe you have lingering debt on credit cards, don't worry about savings, don't worry about investing, it all needs to go toward the debt till the debt is gone.

Your saving is going to do you no good if you got some debt that you have to pay off, maybe you got $1,000 into saving, the rest every dime you can spare goes toward the debt until the debts are paid off and then come back and work on building up your saving

That is my tips for today

The way to start with budgeting is to know how much wiggle room you have, sit down and do the math and unfortunately it kind of stings a little, you need to sit down and look at all of your credit card statement or your bank statements, whatever you use to spend money

Whether it's a debit card, cash is a little harder because there's not digital tracking so you probably have to go back and look at receipts, you need to go back and look at how much you've been spending and then you need to do the math and see if that fits within 70% of your take-home income, if it doesn't then you go to start cutting stuff out until it does

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