Some of you may be intrigued to know that current United States of America Presidential candidate Elizabeth Warren is regarded as a financial guru, and actually created a system that one ups the 10% rule. This could be really useful once you have begun the routine and rhythm and have met your goals when it comes to getting started with the 10% rule. It is a rule that reads: 50% Need, 30% Wants and 20% savings. It is a really interesting and realistic way for everyday people to manage their money. Let’s take a longer look.
Needs are those bills that you absolutely must pay and are the things necessary for survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment and utilities. These are your "must-haves" including items that you are contractually obligated to like debt payments or bills. The "needs" category does not include items that are extras, Netflix and dining out. Half of your after-tax income should be all that you need to cover your needs and obligations. If you are spending more than that on your needs, you will have to either cut down on wants or try to downsize your lifestyle, perhaps to a smaller home or more modest car.
Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronics gadget and ultra-high-speed Internet. Anything in the 'wants' bucket is optional if you boil it down. You can work out at home instead of going to the gym; cook instead of eating out; watch sports on TV instead of getting tickets to the game.
This category also includes those upgrade decisions you make, such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda or choosing between watching television using an antenna for free and spending money to watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining.
Finally, try to allocate 20% of your net income to savings and investments. You should have at least 3 months of emergency savings on hand in case you lose your job or an unforeseen even happens. After that, focus on retirement and meeting other financial goals down the road. Savings can also include debt repayment. While minimum payments are part of the "needs" category, any extra payments reduce principal and future interest owed, so they are savings.
Hopefully, you have some interesting ideas about how your can get started with savings or maybe some cool new ideas on how to better and enhance your savings - after all, it is hand to have and we will all need it at some point - so, start now?