Have you ever felt like you go to work every day, do all the right things, but then look at your bank account and go “WTF!?”
(What The Frugality!?) That’s not Italian there, it’s just another word for economic thinking. Welcome to the ranks of middle America. The silver lining here is that the remedy is a surprisingly simple fix. You’re making enough, you’re saving enough, and you’re spending enough, just all in the wrong order.
I’m a proponent of breaking down a responsible financial plan into three categories- spend, save, and donate. However, that hierarchy often lends itself to a 100/0/0 allocation, bassackwards with all due respect. The quick fix is to reverse the order and attempt a 10/10/80 allocation of cash flow… Save 10%, donate 10%, and then spend 80%.
Once this strategy is adopted, most folks will realize they’re living the same lifestyle they did before. Only now though, they’ll watch their savings and investment accounts steadily grow and begin compounding. Each year, they’ll feel the incredible satisfaction of tithing. We can go back as far as Biblical times to listen to Paul teaching the Corinthians that charity is the greatest of all three abiding virtues. Lastly, you’ll still be spending 80% of your income! Most practicing households embrace this momentum and start shifting their funds further in the right direction, perhaps creating a 15/15/70 program!
Compounding money is exciting, but compounding knowledge is never-ending. I challenge your parents to put three jars in your kids’ rooms and label them save, donate, and spend. Each of their birthday gifts, Christmas gifts, summer job money, etc. can be divvied up according to the same budget you’ve implemented. At the end of the year or on some other special occasion, they can use the spend jar on a game they’ve been wanting and the donate jar to a charity that piques their interest. Small habits create the biggest successes.
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