Rule of Ten: The Least You Can Do

   

Let’s face it: saving is not that easy with all of those bill and additional expenses that we need to cover. But fortunately, it’s not that hard either. As long as you are willing to commit to it, a little tip and rule of ten, will help you go trough this small hurdle of making a saving.

Saving Money Little By Little

What is Rule of Ten?

Rule of Ten is a plan to make a saving at least 10 percent of your money. Why 10%? It’s small enough for you can manage the “missing money”, but it’s big enough to make significant amount.

For example: if you have a salary of $1500 per fortnight, you need to save at least $150 for that paid period.  What you can get after a year (26 fortnights) will be just under $4000! And managing $150 per fortnight or $75 per week from your budget should be not that challanging if you willing to try the tip below.

Maximize your chance!

To get the best out of this technique, so some of the tips below and you will maximise your chance of success

1. Open a new account separately from your “normal account”.
   “If you cannot see it you will not use it” is the main purpose here. Your saving account should not directly and easily viewable by you. Open a dedicated saving account (maybe those no-fee “online” saving account) that should not be linked to your day to day internet banking or ATM.
2. Pay yourself first.
   Transfer that saving amount (10%) first thing before even touch the money from everything else. Better yet, setup on your internet banking a direct recurring payment scheduled to transfer the amount from your day to day account where  you receive the salary in, to that special “saving” account. Place the date 1 day after the usual day of payment. For example: if your salary always come at Thursday, then setup the transfer to be done by Friday . (Not less, as the crew probably were not ready.
3. Do not over-commit the amount.
   If you can afford to save more than 10%, that’s great.. but you need to do this continuously and should not overburden yourself. The problem if you commit too much is that at one day you will stop and start using the money and it defeats the purpose of the saving. Actually if you really tight, start with 5%. Better smaller but consistent rather than too big but you cannot commit.
4. Separate this “saving account” with other account such mortgage offset account.
   The idea is, if you have extra money, put that extra into mortgage offset account to help you reduce the amount of interest paid every moneth. But of course if you need more money to cover expense you can always get it from this offset account. The reason to separate this “saving” account is that the amount of this saving is never to be touched unless really emergency or  until you achieved the goal.
5. Dont put this saving into term deposit.
   Having some extra money on the bank earning no or little interest will tickle you to put it on the term deposit instead. But this again defeat the purpose. This saving money is supposed to be your emergency fund that you use on rainy day. A simple visit to the bank or ATM card should be all you need to access the money. If you put it on the term deposit, then you will need to wait until the maturiry date to access the money without penalty.

What next?

The first goal of this exercise is to give you the level of Financial Protection first. That is to have in that saving account the amount of money enough for you to live without working for 6 months. Of course the amount will be different from person to person who live in different city/country. Do your budget and determine the amount.

Once the first goal is achieved you can start allocate the extra money to top up your investing account. The investment account can be as simple as term deposit, or account for buying share/stock or other investing purposes. Don’t stop what really already started (regular saving), but from time to time if you calculate that you have more than 6 months worth of living cost money (remember to make sure you incorporate any increased of living cost), then transfer the extra amount to your investment account.

In general, if you have other measures in place (income protection insurance, life insurance, etc) you don’t really need more than 6 months. But of course you can just decide to make the goal changed to have 12 months worth of financial protection instead.

Happy Saving !

Related Posts

• Offset Account, Tax and High Rate Term Deposit/Saving Interest
• For the Savvy, There is No Junk Mail ?
• Kiyosaki: “Savers are Losers” – A Sad Truth with a Catch
• A Sweet Revenge: Let The Banks Pay Your Debt
• Income Protection: Your Salary Cover In Need

Denis Kristanda  

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