The 10/10/10 Plan

When Robert and I were younger, we didn’t have a lot of money. At the time, we were living paycheck to paycheck. Even though we were making very little money at the time, we decided in order to have any kind of financial future we had to take tangible steps toward that future.

So, the first thing we did was hire our bookkeeper, Betty. We did this because we knew how easy it would be to lie to ourselves about our financial situation, hoping that our money problems would work themselves out. We wanted real accountability! (No pun intended).

Betty helped us see our finances for what they really were. The first thing we realized was that we were not putting aside anything for our future. Every penny we made was going towards our bills.

So, we decided to pay ourselves first and then pay our creditors. That is when we came up with the 10/10/10 plan.

Every month we took 30 percent from our paychecks and divvied it up like so:

10% Investment

Each month we set aside 10 percent of our income for great opportunities. My first $5,000 investment in a little rental house in Portland was paid just this way.

10% Savings

Each month we set aside 10 percent of our income for emergencies and special opportunities.

10% Charity or Tithing

And each month we set aside 10 percent of our income for giving to charity or tithing because we believe in giving back and that you must give in order to receive.

After we paid those accounts, only then did we pay our creditors.

Betty, of course, said, “You can’t do that! You have to pay your bills. How will you survive?”

Our solution was to pay something every month to some, not all creditors. Sometimes even less than they asked for. It’s not that we didn’t pay our bills; we just did so creatively. Believe me, we were on the phone a lot! And always, we made sure to pay ourselves first.

It’s important to understand that the concept of pay yourself first isn’t about treating yourself to new shoes or a luxurious trip to the spa. No! It’s about taking care of your financial future. And it takes a lot of discipline and planning.

But then again, if it were a piece of cake, everyone would do it.

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Original publish date: August 28, 2014