Jim Rohn’s Top Piece of Financial Advice You Can Use Right Now
When it comes to financial independence, the amount of money you have is not the key factor. Rather, it’s how you spend your money that determines your level of wealth. The most important thing you can do to create and maintain wealth is to live below your means and avoid debt. This opens up more opportunities, as your money can be invested, saved or donated to a charity of your choice. In a perfect world, you would be able to do all three.
One piece of financial advice to help you get started is the 70/30 Rule by the famous entrepreneur, author, and motivational speaker, Jim Rohn. The 70/30 Rule is a guideline for spending, saving, investing, and donating. This rule can be effective because the biggest hurdle for most people is living on 70% of their income after taxes, which includes all necessities and luxuries. The remaining 30% is allocated for investments, savings, and charities.
Getting your spending under control and committing to a budget is necessary if you’re living on less than what you make. You can’t save, invest, pay off debt or give to charity when you are living paycheck-to-paycheck. Living paycheck-to-paycheck is not always the result of insufficient income. According to a Willis Towers Watson survey conducted in 2022, 36% of six-figure earners lived paycheck-to-paycheck, a percentage that has doubled since 2019. A lack of a sound money management strategy may also be contributing to the problem.
Self-made millionaires make saving a habit, according to Thomas Corley, who studied the daily habits of more than 350 rich and poor people for five years. Early savings will help you accumulate more wealth. During their pre-millionaire years, 94% of the self-made millionaires in his study developed the habit of saving 20% of their income.
To break free from the paycheck-to-paycheck cycle, you can use Jim Rohn’s 70% Budget Rule. Moreover, you can use this advice right away to save, invest, pay off debt, and donate.
Breaking Down the 70% Budget Rule
The 70% Budget Rule can be modified into the 70/20/10 rule. In this case, your take-home pay is divided into three buckets based on specific percentages:
1. 70% of your income goes towards monthly bills and everyday expenses.
2. 20% goes towards saving and investing.
3. 10% goes towards debt repayment or donation.
The goal of this ratio is to invest in your long-term financial well-being as well as your current lifestyle. Plus, the 70/20/10 rule can be adjusted according to your specific financial situation.
Use 70% of Your Income for Monthly Spending
Regardless of the variation you use, this part is non-negotiable. This means spending no more than 70% of your monthly income on living expenses. You can divide it into two types of living expenses: essentials like food, rent, and utilities, and discretionary expenses such as a pair of new shoes, eating out, and entertainment. The 70% rule is a good guideline for keeping enough money for essentials and discretionary spending so you can afford everything you need and want in life. You can use the remaining 30% for saving more money and repaying debt, whether it’s credit card debt, utility bills that are late, or other personal debt.
The Difference Between Fixed and Variable Expenses
Budgeting requires understanding monthly expenses and differentiating between fixed and variable expenses. Fixed expenses that remain the same on a monthly basis include mortgage or rent payments, utilities, car payments, insurance premiums, subscriptions, memberships, and child care. Variable expenses, on the other hand, are those that change month to month, such as utilities, groceries, gas, dining out, entertainment, travel, and gifts. To become a better money manager, it’s important to be aware of fixed vs. variable expenses on a monthly basis.
You Should Save 20% of Your Income
Saving is an essential part of everyone’s budget for monthly living expenses and unforeseen events. This is why you plan to save 20% of your total income in the 70% budget rule. It’s important to set aside a portion of your income for emergency funds, retirement savings, and other investment accounts. This way, you’ll be able to enjoy financial freedom without worrying about unexpected expenses or income fluctuations.
– The 70/20/10 rule is a good guideline for spending, saving, investing, and donating.
– Living below your means and avoiding debt is necessary for creating and maintaining wealth.
– Self-made millionaires make saving a habit to accumulate more wealth.
– Budgeting requires understanding between fixed and variable expenses.
– Saving 20% of your income is crucial for monthly living expenses and unforeseen events.
Jim Rohn’s 70% Budget Rule can help you break free from the paycheck-to-paycheck cycle. By living below your means and avoiding debt, you’ll be able to spend less than you earn, which opens up more opportunities. Understanding between fixed and variable expenses, as well as saving 20% of your income, will lead you to financial freedom.
Financial independence is possible by following simple yet effective financial advice like Jim Rohn’s 70% Budget Rule. By prioritizing your spending, saving, investing, and donating, you can achieve your financial goals. Living below your means, avoiding debt, and saving 20% of your income are the keys to creating and maintaining wealth. Remember, the amount of money you have is not the key factor in achieving financial freedom, but rather how you manage your finances.