One does not wake up in wealth. Wealth and riches occur during a process of consistent contribution, growth, and planning. We are taught and pushed to make money but are very rarely coached on what to do with it. Instead, we go thru life looking at big shiny expensive cool looking things or gadgets that are advertised to us and we throw our money at them while smiling with joy in what we get in return.Don't get me wrong I'm not saying not to indulge with your money and treat your self to nice things that you enjoy using or having, all I'm saying is know where you stand with your finances before adding another payment plan or dent in the account.
I was going to list some statistics of the average people's savings but figured I'd save the embarrassing numbers and tell you to stop comparing yourself to the average and instead compete with yourself to always be better. I would like to run you thru my finance plan that I used and the one I am now following. This should be a plan that you visit a couple times a year or when your financial situation may change.
I preach and follow the 30/30/30/10 rule. What that means is that 30 percent goes to living costs, 30 percent goes to debt paydown, 30 percent goes to savings and a 10 percent cushion. This was something I was able to implement in my lifestyle. The fine print I will add to this is to first determine a few things because to get to whereyou'rer going you must know where your starting from. This will help determine your budget program to follow.
Things to dig up and WRITE down;
-income - easy if your salary / if not use a conservative average
-list of debt payments - go deeper and find out each individual interest rate you pay
-list of living costs - rent, mortgage, utilities
-personal costs - outings, food, transportation, subscriptions
From here add up your outs and compare them to your income. Whats left would be what you would further split to go to savings and paying down debt. It does not have to work out to a 30/30/30/10 but it should be something to where every time you get paid you know where and what to do with your money. When you start to pay down your debts be sure to pay the minimum on each and focus the additional paydown on the highest interest debts first.
Other recommendations would be different accounts for different functions. Personally, I have three debits, one for general spending, one for bills/payments, one as a cushion or rainy day fund. On top of that, I have a brokerage account for investing/savings and a 401k that I contribute to. I strongly recommend automating your drafts to deposit into each account accordingly on paydays.
Goals to set and questions to ask
-Become debt free and eliminate payments leaving only bills. How do I get there and how long will it take? Whats my plan?
-Savings or net worth milestones. How do I get there and how long will it take? Whats my plan? Why is my number what it is?
-Achieving Financial Freedom. Moving from having to work and make money to wanting to work. Whats my magic number and why is it that?
I really think that if you have debt, you should concentrate entirely on repaying the debt. It has two key factors - Most likely your interest on the debt is higher that the interest you would receive on your savings and the more important thing is that it gives you psychological freedom.
Keep up the good work, riches comes from a state of mind in the first place. Finance and planning are very import to retain riches.