Unpacking the Financial Lifestyle of 10-10-80
- Friday, May 16, 2014
This simple financial rule has been around for a long time. Some say it’s impossible to live by while others say it’s too simple of a rule for our complicated financial lives.
We’d say that even though the rule seems simple, it’s not only doable but also a great way to begin aligning your finances with your financial goals and dreams. After all, who out there would say no to a debt-free future, worry-free retirement and knowing that they’ve been able to make a positive difference in the lives of others simply through their financial decisions?
So let's unpack the 10 10 80 rule and see how we can use it as our financial compass.
As we generate income, 10 10 80 rules helps us with distributing our income in a way that would:
- Allow us to be generous with 10%.
- Provide us with a financial buffer or margin of 10%.
- Cover all of our day-to-day living expenses with the remaining 80%.
We believe that generosity matters, but it’s not just our opinion. Statistics show that those who give of their time and resources are happier, healthier and live a much more fulfilled life. In a recent article by Huffington Post titled Habits of Supremely Happy People, generosity (spending money on other people) was among top habits.
So we encourage you to make giving a priority. It will not only increase your chances for a happier and healthier life, but it will also give you a better perspective on your own financial circumstances and will allow you to have the right perspective and relationship with money.
Here are few ideas on how to make generosity part of your financial journey:
- Give before you spend rather than after the fact.
- Decide as a family what matters to you most and make giving a family-wide affair. Let your children participate in the act of giving and talk about generosity and why it matters at your dinner table. Choosing to give to the right cause will make it that much more meaningful.
- Giving often is sacrificial, so take a look at your spending habits and see if there are ways to curb spending in certain categories or maybe cut one out completely in order to give. Again, work as a family to find ways to give.
- Participate in projects with your charities of choice. This is a great way to become more engaged and experience how your monetary gifts are being used to help others.
10% Saving & Investing
Creating a financial safety net and financial margin is critical to the well being of your finances. Without making it a priority, you’re in danger of living from paycheck to paycheck and always having to fall back on debt in order to cover life’s unexpected turns.
Instead of saving leftovers, make it a priority and an automatic must before you start spending your paycheck. Saving 10% of your gross income every month will allow you to build solid financial footing, will give you much needed peace of mind and will help you prioritize long-term financial health over fulfilling short-term financial wants. Here are practical ways to make this happen:
- Open a savings account and ask your bank to put withdrawal limitations on that account. This will make it harder for you to tap into those saved funds.
- Ask your employer / HR department to split your paycheck and designate 10% off the top to go into that specific savings account.
- If your employer offers a matching 401k, then use a portion of your 10% to go into that retirement fund and a portion to go to your savings account.
Create a list of short and long-term financial goals. Assign a specific amount and a specific due date to each of those goals. Focus on building your $1000 emergency fund first, then on having 1 full month of living expenses set aside, and then, ideally, on having a 3-6 month living expenses fund.
If you’re looking for creative ways to save money, here are few ideas to get you started!
- Don’t forget to celebrate! Every time you meet another savings goal, celebrate that milestone as a family. Whether it’s a nice dinner or a special get away, make goal achievement a memorable event. It will help you see that your sacrifice is worth the effort and that you can still enjoy life even while on a saving journey.
80% to Live on!
Recently on Budget
Have something to say about this article? Leave your comment via Facebook below!
Listen to Your Favorite Pastors
Add Crosswalk.com content to your siteBrowse available content