Budgeting the 80-10-10 way

There’s a new fad diet out there called the 80-10-10 diet.  This refers to the amount of calories you intake and what percentages of each type of calories you need.  According to the 80-10-10 diet, you would want make sure that your calories come from 80% Carbohydrates, 10% protein, and 10% fat.  I’m not a health expert, but something in me says I need more protein than that!  When it comes to dieting, you’ll find all sorts of conflicting information regarding what you should eat and how much of each.  The Zone diet, for example, has it’s percentages around 40% carbs, 30% protein and 30% fat.  How you do know which one is right?  Try them out and see.  If it works for you, then it must be right, right?

When it comes to using your money however, you don’t want to play around too much to see what works and what doesn’t.  There are 3 things you can do with the money you earn.  You can SPEND it, or SAVE it, or GIVE it away.  Everyone spends.  Most people don’t save.  Even fewer people give away a substantial portion of their income. Most people are on the 100% spend plan, and find that they are NOT happy nor have they built up a sizable nest egg to ensure future security.  If this is you, try a new approach. Try living on less than you make.  How?  Try the 80-10-10 budget plan.  This means SPEND 80%, SAVE 10%, and GIVE 10%.

Some people have a hard time with this.  To some people, asking them to SAVE 10% seems totally outrageous and asking them to GIVE 10% is utterly ridiculous!  Doing BOTH seems impossible.  I’m here to assure you that it’s not.  I’m also here to tell you that your best FINANCIAL life CAN be accomplished by having a proper balance of all three uses of money.

Giving 10%  – Giving your money away, to a church, to a charity, or to a great cause, not only benefits those whom you give to, but it benefits YOU.  When you give your money away freely, with no strings attached, you feel good about yourself.  Even better than giving money away freely is to do it ANONYMOUSLY.  When you give, just for the sake of giving, you open the door to receiving more.  It’s a phenomenon that’s been around as old as time.  What you sow you will also reap.  When you give your money away selflessly, new opportunities and blessings find you.

Save 10% – This is the pay yourself first principle.  This is setting aside 10% of your income for your retirement consistently over your working life.  This ensures that you will have a nest egg large enough to sustain you in your later years, IN LUXURY.  However..  there is one caveat I’ll mention now before continuing.  If you have debt, then this 10% should be used towards eliminating your outstanding debt instead of saving.  Once all your debt is eliminated, then you can begin saving and investing your 10%. For more information about eliminating debt quickly Click Here…

Spend 80% – This is for the rest of your monthly expenses.  Budget the everything else in your life with this remaining amount.

You’ll find that by doing this..  you’ll be a happier person in general… because it feels good to give… because your debts are going down or your savings is going up… and you are living below your means.

What about you?  Do you think it’s possible to live this way?  Do you think it’s possible FOR YOU?  Why or why not?

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The Gap…

Let me ask you… who is better off… The young couple who makes $85,000 a year or the family of four who bring in about $50,000 a year?

Well..with such little information..one would conclude that the couple making $85,000 would be the one’s better off, after all.. they MAKE more money! But perhaps more information might paint a different picture.

What if.. the family of four was living well below their means. Spending $2000 of their $3000 net monthly income on bills and food..giving $300 to their church and saving $700 each and every month and has no debt. And what if the young couple spent $4000 of their $5000 net monthly income on debt payments, bills and food, didn’t save, and spent the other $1000 on buying stuff and eating out and having parties.

Maybe on the surface.. it might STILL appear that the young couple is better off (i.e. they have more stuff, and more FUN) But what happens if BOTH families continue doing what they are CURRENTLY doing for the next 10 years?

Lets assume that both couple still live in the same house, and both households’ income increased by 50%.

In 10 years time.. the young couple will STILL be spending 100% of their net income on Debt Payments, Bills, Food, Eating Out, buying STUFF, and entertaining. They’ll have no savings, and their debt balances and expenses are higher (not lower) than they were 10 years ago. The family of four on the other hand, STILL have no debt, STILL tithe 10% to their church, and STILL invest a good portion of their income. In fact.. their expenses didn’t increase at all.. since they have no debt.. all they are paying for is their monthly necessities, which hasn’t changed much at all in the last 10 years. The only thing that changed for them was the GAP between their INCOME and their EXPENSES. With a wide gap, this allows the family of four to put away more than $1000 a month for a rainy day and for their future. The young couple has no increase in their gap.

Then a layoff hits… The young couple and the family of four lose their jobs. Who is better off now?

The family of four, who was prepared to weather out the storm, is much better off than the young couple, because they can live off their savings and investments for at least 6 months while he looks for another job. The young couple..who have been living paycheck to paycheck despite their high income.. will soon be having collectors calling them at best.. and at worst.. having to face bankruptcy.

So the lesson for you is… Do you know what your GAP is? What is the difference between your INCOME and your EXPENSES? Do you need to take steps to WIDEN the GAP?

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