Today, I’m going to show you a 6-step system to simplify your personal finances and build wealth quickly.
When you have a plan for your money – it can set you free.
When you don’t have a plan for your money – it will enslave you.
Yet I’m amazed at the number of men that 1) don’t have a plan for their money and 2) aren’t tracking it regularly.
Back when I sold a cheap $37/month membership, I’d routinely get emails from men asking for a refund because they, “forgot to cancel,” their payment months ago.
This should be unacceptable to you.
Your money, your finances, and your wealth are your responsibility. Period.
You either control your money or it will control you.
There will be zero hacks or tricks in this issue. Just a simple, proven budgeting system so you can:
- Reach your saving goals (faster)
- Be in control of your finances
- Build healthy money habits
- Stress less about money
- Enjoy life more
And the best part – it’s easy to set up and ANYONE can do it.
Here’s how to nail the 50/30/20 budget system, step by step:
🗂️Tool- click here for an easy-to-use 50/30/20 budget calculator
⚠️Disclaimer: I am not a financial advisor. The content of this post is for educational purposes only (and simply reflects my opinion). Do your own research and consult a licensed financial advisor.
Step 1: Your Top-line Income
The first number to know is your top-line income.
Much like a business, you have money come in and go out each month.
Your top-line income is the amount of money deposited into your bank account each month.
Said another way – it’s your monthly after-tax income.
Example: you receive an after-tax salary of $8000 per month (I will use this number moving forward to keep my examples consistent)
Step 2: 50% Needs
Take your top-line income and multiply it by .5.
This is the amount of money you will budget each month for NEEDS like:
- Housing
- Food
- Transportation
- Basic Utilities
- Insurance
Example: ($8000)(.5) = $4000. This means you can spend up to $4000 each month on needs.
Step 3: 30% Wants
Take your top-line income and multiply it by .3.
This is the amount of money you will budget each month for WANTS like:
- Entertainment
- Fashion/Gear
- Travel
Example: ($8000)(.3) = $2400. This means you can spend up to $2400 each month on wants.
Step 4: 20% Savings
Take your top-line income and multiply it by .2.
This is the amount of money you will budget each month for SAVINGS like:
- Emergency fund
- Debt payments
- Investments
- Retirement
Example: ($8000)(.2) = $1600. This means you will save at least $1600 each month.
*Pro Tip: I like to flip-flop the 30 and 20. Meaning I aim for at least a 30% savings rate each month. I do this because I want to be financially free as soon as possible. To make that happen, I save more and spend less.
Step 5: Automate your savings
If you don’t see the money in your checking account, you won’t spend it.
Have your savings automatically transferred at the beginning of each month so you aren’t tempted.
Any major online banking platform can do this now.
Pro Tip: it’s even easier if your employer has a 401(k) program. Max this out (especially if your employer matches) and have it taken out of your paycheck.
Step 6: Check weekly
What gets measured gets improved.
Check these numbers weekly to stay on top of them.
If you’re married – check with your spouse.
If you’re single – check by yourself.
My favorite tool for this is Personal Capital (now called Empower).
You can sync up all your accounts and quickly see how you’re doing at a glance.
Conclusion
Money doesn’t have to be scary.
And don’t let it rule your life.
Have a simple plan you can stick to long term and you’ll be ahead of 99% of people.
⚡️ Worth your time
I’ve been doing this 10-minute breathwork routine every morning and found it to be both energizing and calming.
Give it a go if you’re in need of some good vibrations to kickstart your day.
🤔 A quote to ponder
Since we’re chatting about finance this week, I’d like to share this quote from Charlie Munger concerning Warren Buffett’s 20-slot rule for investing:
“When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”
He says, “Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
Again, this is a concept that seems perfectly obvious to me. And to Warren it seems perfectly obvious. But this is one of the very few business classes in the U.S. where anybody will be saying so. It just isn’t the conventional wisdom.
To me, it’s obvious that the winner has to bet very selectively. It’s been obvious to me since very early in life. I don’t know why it’s not obvious to very many other people.”