The number one rule in managing your finances is to have a definite plan that you can follow religiously. On the top of the list is the rule that you should PAY YOURSELF FIRST. It means that you must set aside a certain percentage of your income for your future expenses before paying your bills. Most people think that it is not possible to save money before paying their bills, when their income hardly makes the ends meet.
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But if your goal is to become financially independent, the best way to do it is to pay yourself first and increase your earnings by having a multiple source of income.
At this point, I will how show how to allocate your money properly into different priorities so that you can enjoy and grow it at the same time. Get yourself six transparent jars or any container that you prefer and label it accordingly:
I Always Have Money Account – Put 1% of your income and you will not withdraw the money you put here for the rest of your life. In addition, put some amount of money (like loose change) in this account daily.
Empowering effect: I always have money that I will never need.
Financial Liberation Account- Set aside 3% of your income and invest it in an instrument that will give you passive income. You will never take out the principal in this account.
Empowering effect: My money works hard for me and makes me more and more money.
Two Types of Passive Income:
- Investment Income – This is the money that works while you’re asleep or away. You can earn by simply investing your money in a well-reputable company or asset management firm. You can check on your local bank if they offer a mutual fund or UITF account. You can also look into the stock market. Just find a good broker that is licensed and affiliated to your local stock exchange.
You can also open a FOREX account and start participating in the largest financial market in the world. Forex can offer a huge potential earning as long as you’re informed and properly trained. But if you don’t want to do the trading yourself, you can open a PAMM account wherein there’s a fund manager that will trade for you.
- Ongoing Business Income – This is where your business generates money for you. You don’t have to become an employee of your business (self-employed) but you can have other people or an automated system working in your behalf.
There are lots of businesses to choose from but the ideal ones are those low labor businesses like parking lots or vending machines. You don’t have to spend too much time and effort in these businesses but the income is ongoing as long as the location is strategic. Creating a new developed product or service is also an advantage because you can open it for franchise. You can earn a royalty fee for every sale from your franchise business partners.
Yearly Income Account – Compute what amount of money you need to last yourself a year. Put 3% of your income in this account with the intention of reaching that total yearly income you targeted. This is you emergency fund that you will put in the bank so that it can easily be withdrawn in case of need.
Empowering effect: I always make decisions that are for the highest good of all concerned including me.
Abundant Spending Account – Set aside 3% of your income. Decide on the level or amount of money that when reached by this account, you will spend all the money in only one day. If the set amount is not reached in one quarter, spend all the money.
This is contrary to the popular belief that you must live below your means. We are taught to be guilty whenever we spend on luxury. But it should not be the case because we need to enjoy the fruits of our labor for it can give us more energy to do more and be productive. The more energy you have, the better your results.
Empowering effect: Whenever I spend money, more and more money comes to me.
Tithing Account- Always set aside 10% of your income and donate it to the organization or person from where you derive spiritual guidance.
Empowering effect: I always pay what is due to God
Giving Account- Set aside 10% of your income for giving to others. The more you are trained to give without expecting something in return, the more blessings you can attract.
The best time to give is today. Do it now.
As contradicting as it may sound, but paying yourself first and giving are completely relative. Giving will open your heart to receive more blessings not just in material terms but also in spiritual and psychological aspect. It gives energy to your spirit. Remember, more energy means more money.
So, that’s a sum total of 20%.That’s a pretty small amount that you need to set aside every month. You still have the remaining 80% of your income to pay your bills. After paying your dues, you either have a deficit or surplus. Good news if you have a surplus income, it means that you can create another money management plan for your dream and self-improvement goals.
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Good tips, thanks for sharing