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General, Money Matters

3 January 2017 | 1 Comment

A couple of people have asked me on tips on money management. So I am sharing with you. No shiny objects here, just plain planning and budgetting!

I am suggesting a 6 + 1 breakdown of all the monies you earn from any source of income you have. I use this method diligently and in most parts, I am always financially able to manage my living well enough.

I have written some articles on this before, however I am going to summarize them again here. You can implement this method right away – right this moment. If this is a change from your other methods, then there will be some initial discomfort as with any changes in various areas, be it financial, diet, fitness or health.

First let’s define the word ‘income’.

Income is defined as money from salaries, commissions, bonuses, profits if you are business person, dividends, or a windfall of some kind (think of a lottery, lucky-draw, contest, competition prize money).

The monies are divided using the following breakdowns, and you will need to hold them in separate accounts to manage it better.

The First 10% is placed in an account labelled as: Financial Freedom Account. This is then used to buy investments that will yield either residual or capital growth or better still, both. The money accumulating in this account is for this purpose only. And never touch this money to pay a debt, or an expense, or even use it in emergencies. NEVER.

The next 10% is placed in an account labelled as: Long Term Savings for Spending. Yes, as the name suggests, it is a Long Terms Savings for Spending. Example: accumulate in this account to make big ticket items purchase such as a Flat-screen TV, high quality water-filtration device for the home, plan a renovation for the home, decorations, etc. It is saved for the purpose of spending. You can also use this fund to pay off a credit card or a nagging student loan, if it helps you bring more peace of mind.

If you like a big fancy holiday, then this funds can be allocated for the purpose. So yes, do plan in your calendar!

The next 10% is now placed in this account called: Education Account. Use this money to buy books, video or audio materials on enhancing your life skills, or career skills. Even to attend a conference, seminar or a course on development of one-self or for a professional skills enhancement.

For all our necessities in living such as rentals, mortgages, car-payments, fuel, groceries, utilities, clothing, children’s schooling expenses, we allocate 55% of funds for this purposes. And if we cannot live in this amount, then a simplification of life is necessary, and yes, cut out that high-speed broadband for an entry level broadband. Yes, scale down the fuel consumed, yes, eat cheaper. Use less resources and live within this budget. Then think of ways to increase earnings so that this budget can be higher.

The next 10% is for our PLAY account. Yes, to play! Yes, go for that massage, spa, picnic with money where your family can enjoy riding on motor-boats, have a barbecue. In other words, nurture the person doing all the work. The rule is that this aacount must be empty by month end! Enjoy! You have to have fun, else living will be very mundane.

The last 5% is for our Give purpose. Is there a purpose that you support: do you like sponsoring books for the disabled child in your neighbourhood, or contribute comics to your community center, or support a cause such as autistic child centers, or buying a hearing aid for someone in need, etc.

There is a + 1 here – if you are in business of your own or self employed, and need to budget in for scheduled tax payments, then you can open another holding account for this purpose. Then use the funds from this account to settle your taxes on time.

I have been practicing this method for a decade now, and suffice to say, I have good financials. I may not necessarily earn as much as you do, however I might have better financials than you do.

Hope this helps you to become more financially strong. And if this is new to you, consider this your Reset button for a sound financial future.


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One Response on “Reset button”

  1. Doug Morgan says:

    Good advice, Riyaz. We do something similar. We can allocate funds through our bank account by having extra saving accounts for different purposes. We put various amounts in each according to what we want to do with the monies. This is used for what we call liquid funds. We have investment monies for long-term retirement monies with a stock broker. He has our funds there diversified so we are protected from the ups and downs of the stock market. That way we are assured of enough for retirement years. We have guaranteed income accounts here. We have begun to draw from one of these accounts required by law at age 70.

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