Financially Free Series: Create a Spending Plan
Create a Spending Plan
Step 3—Commit to Save 15%-20% of Your Annual Income
One of the hardest steps in this series is to commit to save 15-20% of your annual income. For most, it can actually take several years to get to 20% but if you start somewhere it’s better than not starting at all. The easiest way to reach this goal is to instead of depositing your paycheck into your checking account, deposit it into your savings account and set up direct drafts from your savings to pay your monthly bills. You will also set it up to do a direct deposit into your checking account for living expenses.
To determine how much you will need for living expenses do a quick Value/No Longer Value Chart. Take a look at your bank statements, what are you constantly spending money on that is of value or is it something that you can live without? Example of No Value: Starbucks every morning, basic cable vs. full package, going out to eat 4 times a week vs. 1-2 times a month, etc. Only putting enough money to cover your values is only allowing yourself to spend that much. The rest is already in savings and “out of reach”.
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What are ways that you are saving money for the future.