50-40-10 rule

Earning money is quite a standard and easy process for most of us. We get up, we go to work and at the end of the week we get paid. That's the easy part - but then comes the hard and difficult part - how to spend it.

Don't get me wrong - we ALL know how to spend money - spending is a much easier and pleasant task then making it but what I am talking about is spending it WISELY. And this is a very difficult thing because as a rule we are not really taught anything at school about how to look after money because the education system (at least it did when I attended Fitzroy High School between 1968 and 1972) was designed to teach us about American History or Geography or even about the chap with the bucket on his head - what was his name? Oh, yes Ned Kelly. Now when was the last time knowing what happened in 1863 helped you deal with your financial affairs.?

Luckily for you I am here. Over the years I have developed my own set of rules that I am confident will help you learn how to successfully deal with your finances and it is my  50-40-10 rule:

The first 50% (or half) of what you bring home to be used for your everyday cost of living. Things like bills, food, car expenses and entertainment.

The next 40% of what you bring home is for short to medium saving. These savings will be for holidays, investments or just simply for rainy days. It can include investment properties.

The next 10% of what you bring home is for long-term investment. Generally, this would be superannuation. If you are working the chances are that your employer is already contributing the minimum 9%. If you then contribute 10% of your money either as a salary sacrifice, which has some tax benefits or simply as after-tax contributions then that's all you need to worry. Remember! the younger you are the more you will accumulate for retirement.

And that's it! This is all you need to know about finances my 50 - 40 - 10 rule.

Last year I developed a coaching program called FixMyBudget, which takes clients through a step by step process, teaching them how to make up a budget and more importantly how to stick with it. I started it with 22 clients but sadly I only have 14 left - most of those that dropped off found it difficult to work with budgets and they were happy just to go back to what they were doing before. But the ones that stuck with it are reaping the rewards because for the first time they have all saved money.

If you are having difficulty with budgeting and handling your finances I can help you.

In the meantime, my challenge to you is this - give my 50-40-10 rule a go for say 6 months and let's see what happens.