When it comes to money and finances, it seems like ninety percent of the population doesn’t know what they are doing, and the other ten percent know exactly what they are doing. This is because it is true. The majority of the population doesn’t know how to make enough money, and because they don’t know how to do this first step, they never get to the second step of saving and budgeting. Rarely do they get to the third step of investing and making money from their money. In this article, we will discuss how to budget using six different accounts for different aspects of your life.
Maybe you have made some bad financial decisions and have fallen into hard times. Maybe it has even made your credit bad. You can still get installment loans for bad credit and create a useful budget at the same time.
Budgeting With Six Accounts
Budgeting, by definition, is the process of making your own personal plan for how you will spend your money. Because it requires time and effort to do, and a lot of discipline to continue doing and implementing, people just let it slide and spend everything they earn without realizing the risks of doing this. You should have six different accounts, to save money almost automatically, every time you get a paycheck or earn money. They are as follows:
- Financial Freedom Account
- Long-Term Savings for Spending Accounts
- Education Fund for Your Growth and Development
- Necessities for Everyday Expenses
- The Play Account
- The Giving Back Account
The financial freedom account is used for that exact thing. It is supposed to accumulate wealth for you, by you saving or putting away ten percent of everything you earn. The goal is to have this account grow enough, so that when you’re ready to retire, you can live off of the interest that it pays, which will become your income. It should be an account whose purpose is also to outlive you, and in your will, you will specifically tell your inheritors to do the same thing and use only the interest that it produces so that it becomes a generational account, with each generation adding 10% of their incomes and leaving it to their inheritors.
The second account is the long-term savings for spending account, which you will use for your children’s education and other expenses. Ten percent should also be saved into this account from all the money you make. If you start saving for this, even before you have children, by the time they are eighteen and ready to go to college you will have saved a substantial amount of money to cover their tuition.
The third account is the education fund for your growth and personal development. You should set aside another 10% of everything you earn so that you can buy books, courses, coaches, and personal growth assistance. Warren Buffett says that the best investment you can make is an investment in yourself, so if you can afford to spend more than 10% on your education, do it.
The fourth account consists of 55% of everything you earn and should be used for everyday necessities such as rent, food, utilities, gas, clothes, etc. This will keep you healthy and sane, so that you can focus on earning more money and growing the other accounts even if it’s just a little at a time.
The fifth account is the play account, to which you contribute 10% and will be used for fun activities for yourself and family.
Finally, the remaining 5% gets put into the giving back account for charitable donations and helping those who need it more than you.
We have discussed the six different accounts that will help you make a solid budget for your life. They break down the different aspects of your life and can help you save for your kid’s education, for your own well-being and growth, for the future and other generations, and so that you have enough money at the end of the month, instead of not enough month at the end of your money.