How to save and grow your money, despite having very little money is a challenge every teacher wants to be solved sooner than later.
Teacher by design are not the most adequately paid employees, globally thus it stands that they must make use of the little they have.
In advanced countries, teachers are regards as essential workers thus given priority, something many African nations are yet to learn.
By reading books such as Rich dad, Poor dad one understands the importance of money management and its role in wealth building.
From Warren Buffet to Elon Musk the rules of wealth creation seem to remain the same despite having slight variations.
For example, Warren Buffet prefers fungal spending, Elon Musk prefers wealth generation through sales, while Bill gates encourage a minimalist lifestyle.
At the core of all their lifestyles, one rule stands out: the 50-30-20 rule to be smarter and more successful with your money.
The 50-30-20 money rule is a budgeting strategy that encourages individual to divide up their incomes into three portions with each portion catering for an expense.
This makes managing your finances and following a monthly budget something anyone can do easily since it simplifies the entire process.
Before applying you must divide your expenses into three broad categories namely;
- Necessities,
- Wants,
- Savings and investments.
Once you have categorized your expense you can divide your income as follows;
- 50% of your income should go toward things you need
- 20% of your income should go toward savings and investments
- 30% of your income should go toward things you want
This makes managing your money much easier, especially if you’re using your bank account to handle all your money affairs.
In the first category, you have all the essential costs, such as rent, mortgage payments, food, utilities, health insurance, debt payments and car payments.
In case you find yourself having more essential costs, then you may have to reduce the contribution towards wants.
The second category will take up your liquid savings, such as emergency fund; retirement savings and any other investments, such as a brokerage account,
The contributions in this category must be incomes generating i.e. you have hope that you will make money by putting it in this account.
Experts recommend that you have at least three to six months’ savings worth of living expenses.
The third category caters for everything that is not considered an essential cost, such as travel, subscriptions, dining out, shopping and fun.
You can use this category to plan for your favourite luxury upgrades such as a dream holiday with the family or upgrade your car.
As a cliff note, this strategy is not written in stone that you can’t make any modifications; this is simply a lighthouse to the seashores.
There is no such thing as a one-size-fits-all approach when it comes to money management.
However, the 50-30-20 strategy is a great plan that can help you to save and grow your money by dividing it up.