It’s all about the percentages

Anyone who has ever read a book about paying off debt or saving money will inevitably read about the ten percent rule where you save ten percent of your gross income. It’s not that easy to do, right?

So many of us get ourselves into a position where we just can’t see a way out of with school fees, pet bills or pay cuts always getting in our way. I have talked in several blogs about budgets and sacrifice and the ever future goal of success and sometimes it’s hard to know where to start.

Are you aware of the percentage of your wage that goes toward bills? Here’s a budget for a couple without children:

You can see that the majority of their money goes to their bills. They save nothing at the end of the fortnight. Typically these types have a credit card that picks up all the extras that are not accounted for each pay meaning they have an ever fluctuating credit balance.

It’s interesting to know that nearly half of their take home pay goes toward accommodation. What if the goal was to save ten percent of their NETT amount? Let’s see if we can adjust it.

Okay, we moved them into a cheaper rental saving them one hundred and twenty dollars per fortnight and cut back on the fun stuff like alcohol and dining out. Making those few adjustments made all the difference. They still have a roof over their head and until they are debt free they still enjoy a drop of ale, just from the specials bin at the local or changing their habits.

But the best thing is they are actually saving money. Now they have two choices: pay down their debt with the savings money or just flat-out save it. In this scenario I would encourage them to save a little so they have a buffer for the unexpected things. This way they are not putting more pressure on themselves by using their credit card. Once they reach an acceptable target ( in this case I would say one year) they then start a debt reduction plan.

Get yourself a spreadsheet and work out your percentages or drop me a line and I will make one for you. Good luck and Merry Christmas.