The Three Piggy Banks

Last week I wrote about the importance of making sure that every dollar you set aside for investing stays in your investing/asset column. This can be challenging for a lot of people who find that once they pay all their bills, and then spend money each day on food, gas and other living expenses, they have nothing left at the end of the month. I know the feeling well because that was my financial situation years ago.

Robert and I finally came to realization that if we didn’t start putting something aside for our investments – for our future – then we’d end up with nothing. So we made a plan, and the first part of the plan was to commit to this:

For every dollar that came into our household, no matter where it came from, we would take 30% off the top.

In other words we decided to pay ourselves first, before paying anyone else. If $100 came in then we put aside $30. If $1.00 came in then it was 30 cents.

The second part of the plan was to divide the 30% into three accounts, which at the time were piggy banks. The three piggy banks were labeled:

  1. Savings Account (10%)

    This account is a cushion for unforeseen emergencies or special opportunities that improve your life.

  2. Investing Account (10%)

    These are funds looking for a great investment opportunity.

  3. Charity or Tithing Account (10%)

    As the saying goes, “Give and ye shall receive.” Another saying I heard is that “God doesn’t need to receive but humans do need to give.” Charity is a powerful tool with many benefits to all involved. One line of the Rich Woman’s Creed is “I am grateful.” It’s very gratifying to share what you have and be of service to others.

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After we took the 30% off the top, the remaining monies went to pay our bills. Paying ourselves first did not mean that we spent that 30% on clothes, nice restaurants, and vacations. Paying ourselves first meant that we were creating our financial future.

The key to making this plan work was that we committed to do this with every dollar that came into our household. It would have been easy to slip back to old habits and dip into that 30% from time to time, or to say, “We really need a new couch, let’s skip the piggy banks this month.” The magic comes from the discipline of doing this with every dollar and sticking to the plan every month.

So start planning for your financial future now – create a plan to set aside money exclusively for investing, stick to the plan, and watch your nest egg grow. In the meantime, keep improving your financial education so you can put that money to good use.

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