Personal Finance, Family and Career

Posts from — July 2009

The Balanced Money Formula

“I cannot follow a budget”. That phrase seems to creep up on anyone of us. I’ve been struggling with creating a detailed budget of my everyday spending. Should I bring a paper and pencil every time I buy a bottled water? Should I list down that biscuit I bought? Seriously, I am not a great planner.

Being in debt and having little savings, I decided to look into a financial plan that’s well suited for my lifestyle. It’s called the Balanced Money Formula. The Balanced Money Formula comes from All Your Worth: The Ultimate Lifetime Money Plan, a personal finance book.

The Balanced Money Formula consists of three parts:

The Balanced Money Formula

Savings
This consist of 20% of your take home pay. This is what you would save for retirement and short-term goals. Perhaps you’d want to go to Hong Kong or Thailand sometime, here’s where you’d want your money.

Needs
This consists of 50% of your take home pay. This is meant to be used to pay all the necessities including transportation, food and housing.

Wants This consists of 30% of your take home pay. This is meant to be used however and whenever you like. If you’d like to go the movies everyday, you’d get the money from here. Just remember that you cannot go beyond 30% of your take home salary.

The Balance Money Formula states that:

When your money is in balance, you always have enough to pay your bills, have some fun, and save for your dreams. And here is the best part of all. Once your money is in balance, you can stop worrying about it. Managing your money becomes automatic.

I am actually finding it easier to use this type of budgeting in my own life. I am finding it easy to save since I don’t think much about saving, paying the bills and I can freely spend my 30% of my take home pay for anything that fancies me.

You can try it out for yourself and see if the Balanced Money Formula suits you.

July 31, 2009   1 Comment