The One Budgeting Tip That Changed My Life
I’ve never been great at saving money, it used to burn a hole in my pockets when I was a teenager and in my twenties, but ever since becoming a Mom I knew I had to do a lot better to save money. Whether I’m saving up for an emergency fund, to put away for my kid’s college funds, for unexpected car repairs or to travel with the family, this one simple tip has helped ensure that I’ve always got some money stashed away no matter what.
The Ten Percent Rule
It’s really quite simple, like I said. All you’ve got to do is put away 10% of any check you earn.
Did you get an unexpected bonus from work? A holiday bonus? A tax return? Those all count too, so put away 10% into another account right off the top.
This includes 10% from all of your paychecks, too. Before you even start to plan the rest of your budget, take off 10% to save for an emergency, or for whatever.
It’s called paying yourself first. Basically, if you pay yourself first by putting your personal savings fund in the priority position by taking that 10% off before doing anything else with your check, you won’t miss it as much. You can probably budget around it.
There’s one exception to the rule…
If you have credit card debt or other short-term debt that charges a high interest rate, you should add this 10% towards paying off that debt before you add the 10% into your savings account. So basically, calculate when you would normally put towards paying off that debt, and pay that AS WELL as 10% of every check you take in. It might be tough, but it will save you money in the long run.
The reason to pay off the credit card before saving 10% is simply because if your credit card is costing you about 20% per year, being able to save that 20% by paying it off sooner is much harder than this money will be working for you in your savings account.
Also, once you’ve got the credit card paid off and you’re used to spending your usual payment + 10%, it will be easy to fit that 10% into your normal, everyday budget.
You Want To Have Savings When You Have Kids
Having some money stashed away in the bank can give you a lot of piece of mind. If one of your kids needs emergency dental work, or something happens to your vehicle, or you need to travel across the country to visit a sick relative with no notice – having some savings means that money is one less thing to worry about.
Author of The Wealthy Barber and co-host of the Canadian TV show Dragon’s Den (It’s the Canadian version of Shark Tank) says that if you save 10% for your entire life, it’s quite possible for just about anybody to retire as a millionaire with some diligent financial planning.
This really changed my mind. I’m not a wealthy Mom, but I have enough for emergencies and every single time I get a check, I watch my safety grow a little bit stronger.