Long-term savings (security) –10%
The average American has no more than 1000% in their bank account (Kirkham, 2015)[2]. Most important, is to make sure only 55% goes towards your necessities. Once you understand where and how much you want to spend in a month, you will be able to save extra money in your savings that will eventually benefit you in the future.
It is recommended to have at least a 6-month salary in your savings for use in tough financial times. If you are not able to save around 10% of your salary, it is due to one of the following reasons. You are either earning too little or perhaps you are spending too much. If it’s the former, you need to find additional ways to make more money to achieve financial freedom.
Financial Freedom (Investments or Businesses) – 10%
Even if you are not a professional investor, it is still beneficial to invest in a freedom account. Take 10% of your income and put it in index funds. Index funds are basically mutual funds that allow investors to earn a specified amount of money on the deposited funds. This will ensure a steady and constant growth in your asset. Index funds usually have a growth rate of 7-10% which ensures a steady increase on your invested funds.
Education –10%
“Formal Education can make you a living. But if you want to make a fortune then it is through self-education”. Jim Rohn.
Here education refers to self-education. You cannot hope to stick with your formal education and reach heights of success. You have to become more than what you are. You need to learn a lot before you can turn your life around. That’s where self-education comes in. If you want to be one of those who have achieved financial freedom, you have to learn from people who successfully completed this journey. All the failures they encountered will heed you, and their routines and habits will guide you.
Here are some good books as recommendations.
The 4-Hour Workweek: A book by Tim Ferriss
Rich Dad Poor Dad: A book by Robert Kiyosaki and Sharon Lechte
The Lazy Man’s Guide to Living the Good Life: A book by Mike Vestil
Education is vital on your path to financial freedom. Your mindset needs to be one of making a profit instead of a wage.
Fun – 10%
There is a grave misunderstanding about saving for financial freedom for your retirement years. People often dismiss it by saying that what the point of being young and having no fun as you saving it all of later. With that 10% of your income, go all out and have a blast. You get one go at life so don’t waste it
