One of the most common resolutions is “save money”, “learn to budget”, and “invest in retirement”.
There is more than hundreds of books on the topic of financial planning, excel spreadsheet, and different mobile apps that can help you budget, save, and invest.
We all know why it is important to budget, save, and invest in our retirement, but in the US, more than 50% of the American have less than $1000 in their emergency funds. So, if we are one of the most educated countries in the world, how come we don’t know that $1000 is just not enough. We should aim at incurring an emergency fund that is worth 9 months of monthly payments in case of medical care, layout, or anything that is consider ’emergency’. But going on vacation, buying gifts for holidays, and shopping for the 10th pair of shoes do not constitute as ’emergency’.
It is the mindset and the framing. We all know that ‘what to do’, but we don’t now the ‘how to’.
I believe in the KISS Method (KISS stands for Keep it simple, stupid) BUT I am going to think positive and call my KISS method as Keep it simple and sane !
It is based on Elizabeth Warren’s work 50/30/20 Rule.
Where 50% of your monthly salary go to ‘MUST HAVE’ that are essential for your basic survival (rent/mortgage, food, transportation, basic clothing, reasonable living condition).
Where 30% goes toward your “WANTS” such as the entertainment, shopping, dining out, and your desire.
Where 20% goes toward your “SAVING” – where 10% goes to your emergency fund and 10% goes to your investment fund.
Here is my own twist to the 50-30-20 rule:
I believe we can reduce our ‘wants’ from 30% to 20% by being creative in how we use our money and see buy things we want. To help growth our nest eggs, it is important to add more to your investment and emergency funds from 20% to 30%, especially for folks who are starting late in their investments.
As long as you remember to KISS your budgeting, saving, and investing, you are on your way in bringing money karma toward yourself. When you take care of your money, the universe will take care of you.