Savings involves the implementation of strategies on a technical as well as a psychological level. You need an efficient system in place to manage your money properly. One of the best things to do is to open up a number of savings accounts, to distribute your earnings into each account with a predefined percentage.
This is the first thing you must do as soon as you receive your paycheck.
Almost all the books written on wealth creation talk about “paying-yourself-first”. Our system is merely an application of such a strategy. This would help you build a secure and a long lasting relationship with money. The six recommended accounts would be as follows:
This money should be solely invested and not spent until you start getting interest on this amount. According to the experts, you may put about 10% in this account. Such an account could be used to make all kinds of investments.
This account should consist of about 2 to 4 months of living expenses. We live in a world of uncertainties and we often come across emergencies out of career transitions, work or accidents. Such a way, you wouldn’t have to bother about bouncing checks. As soon as you gather enough funds in your account, you can stop depositing in this account.
Almost all the financial experts recommend giving away some percentage of your income. If you think you are not making enough money, the act of giving would strongly communicate with your subconscious mind and create a feeling of abundance. Most people deposit 5-10% of their earnings in this account.
The money in this account is solely for entertainment or pleasure purposes. You deserve the right to indulge and hence this account is extremely important. If you do not have an entertainment account, you would feel deprived and may perhaps sabotage the remaining part of the system. Many people deposit 10% of the earnings in this account.
We often come across non-monthly expenses such as car, home, vacations, computer, stereo, school, workshops and many more. At the same time as it is good to have one account for miscellaneous expenses, you must dedicate different percentages for specific purposes. Typically, about 10% in this account would be good enough.
The basic necessities involve around 40-80% of your income such as food, rent, clothes, and utilities. Most people are barely able to meet the basic requirements, however if you have a lower income, then you can cut off on the percentages in accordance to your earnings.