Securing your financial future with the Lifetime Money Plan

save money

One of the interesting reads I’ve had this week was an article about the 50/30/20 rule outlined in the book “All Your Worth: The Ultimate Lifetime Money Plan“, written by Elizabeth Warren and her daughter Amelia Warren Tyagi.

In their book, they describe how people can take matters into their own hands when it comes to securing their financial future. It is no secret that being able to properly manage your budget and creating a solid financial cushion for the future is a big challenge for most of us. In a world where we are constantly surrounded and even seduced by all kind of fancy things to buy, keeping track on your expenditures seems even more difficult.

But still, if we don’t want to end up with an empty bucket at the end of our working life, we need to take action as early in our life as possible.

If you ask me, the 50/30/20 rule is in fact a very simple way to cut your budget in 3 pieces to decide what you are going to spend your money on.

What this rule of thumb proposes is that you should spend your money in such a way that not more than 50% of your net-income is spent on the Essential expenses. These includes the money you spend on groceries, utilities, rent, insurance etc.; the basis needs to maintain the fundamentals of life.

dilbert on retiring

source: http://www.dilbert.com

The next step of the 50/30/20 rule is that no more than 30% of the net-income should be spent on your Lifestyles choices. These are the “wants” in your life such as going to restaurants, clubbing, (expensive) hobbies, pets, personal care etc.
Sometimes it might be a little hard to distinguish the difference between a “need” and a “want”. What you could do is ask yourself if the thing you are considering to buy is really necessary or just great (or fun) to have.

The “20” in the 50/30/20 rule refers to the amount of money you should set apart for Financial priorities. These includes paying off debts and saving for the future. Like I mentioned earlier, you wouldn’t want to end up with an empty bank account once you retire.

So how does this Lifetime money plan works? This Huffington Post article has two nice examples of how this could work in the US. In a few weeks I will be posting some examples of how it could work in my country as well.

Marciano Lie A Young is a trainer and consultant who has conducted training programs on Leadership, Work-life balance, Entrepreneurship and Public speaking in over 20 countries in 4 continents.
He is the director of the Leaders Management Group Foundation, an organization that offers training and consultancy services to Small and Medium businesses. You can follow him on twitter on @marcianolie or visit his blog www.marcianolieayoung.com.