Math is not always easy for everyone. Sometimes, we reach for the calculator before we stop and realize the math is far easier than expected. In the same vein, we tend to reach out for help from experts when we could solve the problem ourselves.
Credit problems are an excellent example of reaching for help after having created the problem. The reality is, though, that if you created the problem then you can solve the problem. And – you can solve the problem through common sense and a very easy math problem.
To illustrate this process, I’ll use a friend of mine. My friend started earning more money than he ever thought possible. He immediately started spending money – without first saving. He also made another mistake, he spent more money than he earned. After months and months of this behavior, the credit problems started to roll in through the mail and email. Imagine his frustration. After all, he was earning more money than previous jobs, so why couldn’t he go on a spending spree?
The Simple Math
Let’s face it. For every dollar you earn, the majority of it goes toward bills. If you have past due bills then the situation is worse because we have a tendency to focus on them first. A simple formula will keep you out of trouble. For every dollar you earn, save 10 cents. Yes, ten percent of your money should go into a savings account. And this money should go right off the top.
My friend could have saved himself a world of trouble. No, he didn’t have a budget. No, he didn’t want one. Instead, saving 10 percent of his income – put away on pay day – would have saved him the pain he deserved.
That my friends is today’s lesson. Always save 10 percent of your income. No excuses.
If you are in credit trouble and facing foreclosure then put 10 percent of your income away. Yes, some experts would tell you to pay off debts or past due bills. In fact, if you have past due bills then put 10 percent away – regardless of your financial situation. Yes – even if your credit is in perfect health then put 10 percent of your income away.
Never Spend Your 10 Percent Account
This 10 percent must never be touched, never used, never transfered from savings into checking. No – this money is important. It’s the “I’m okay fund.”
No matter how bad things get – you’ll always have the “I’m okay fund.” This is not an emergency fund. This is not a retirement fund. This is simply a keeping sane fund. It’s your comfort food. It’s your sanity.
So – don’t watch that fund increase and increase and expect to spend the money. This 10 percent is to keep you safe and sound.
Best of luck my friends. Use the 10 percent rule immediately and let me know how your emotional health increases.
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