How to allocate your income
Managing money is a lot harder than making money it sounds counter intuitive, right?
Managing money is a lot harder than making money it sounds counter intuitive, right? But, its more challenging because we need to lead our money rather than being led by it. We need to tell our money where to go. And if we want our money to work for us, we actually have to be very intentional about giving it a job title.
This read is all about allocating your income effectively. Its underpinned by the following 3 principals so if you remember anything, let it be this:
- Habits create structure
- Structure creates systems
- Systems create wealth
3 STEPS TO ALLOCATE YOUR INCOME
UNDERSTAND YOUR PRIORITIES
1. Track your spending
1. Track your spending
Gain awareness of how you are currently spending your income. There are some fancy ways to do this, but a good old pen and paper works perfectly. Download your bank statements for the last 3 months and see what trends emerge.
If youd like to track it on a spreadsheet, Ive put together a free and easy-to-use budget template for you.
2. Define your priorities
What is important to you and where does your focus need to be in the short, medium and long term?
Do you need to build up an emergency fund or maybe cut down on some debt? Are you saving up for an overseas holiday trip? Remember, our basic needs (food, housing costs, clothes) and insurance (medical aid, income protection) should also be considered in this step.
Whatever it may be, your priorities are exactly that your priorities. It should reflect your values and ultimately what is important to you.
2. Allocate your income according to your priorities
The last step is just a little maths. Work out what percentage of your income needs to be allocated to each priority. The pie chart below can be used to guide your thinking.
SOMETIMES WE JUST NEED THAT EXTRA PUSH
If youre serious about having a healthier money life reflective of your priorities and values, the time to take action is now.
A Personal Finance Starter Pack may be exactly what youre looking for.
Its a two session experience to get you comfortable with the fundamentals of Personal Finance to help you manage your money rather than it manage you.
If youre like to learn more about Starter Packs or how I can help you reduce the stress the feel about navigating your money life, Id love to offer you a Free Clarity Call. Hit the button below to book your free session.