Let’s face it; saving money can be hard. A lot of times it feels like we have too much month left at the end of our money. How can we truly gain traction in our finances?
During our debt-free journey, it was vital that we find as much cash as possible in our monthly income. Through the years I’ve created a simple formula that will save you hundreds of dollars every month. It’s The 10% Rule.
Cut Your Spending by 10%
I hope you didn’t close the window after reading that line! The last thing we want to do is cut more of our spending. Trust me, you’ll barely notice the difference and it will save you hundreds each month!
Divide your spending habits into different categories (clothing, entertainment, restaurants, etc.) and budget a certain amount for each one. Once each category has a designated amount, cut them all by 10%. Take that money and direct it toward your debt, and the other 90% is what stays in that budgeted category for all future months.
The beauty of this plan is that you really won’t feel super restrained by this budget. Let’s say you normally budget $200 for entertainment. After cutting it by 10%, your new budget for entertainment is $180 and you get to save that $20. How much different will your lifestyle be by only cutting it $20 a month?
After you do this across multiple categories, you now have more money to focus toward your financial goal. Not sure where to start? I’ve created a free 10% Rule Worksheet that will give you ideas on how to categorize your spending and how to cut it.
Direct 10% of Your Monthly Income Toward Debt
The best way to knock debt out fast is to throw as much money as possible at it. A great starting point is paying an extra 10% of your monthly income on top of those monthly payments.
Gee Craig, that advice would be great if I made more money. By the time I pay my bills, fill the tank, and put food on the table, there’s no money left! This is a common response I get when discussing this topic. When bills and debt payments are draining our paychecks, finding extra money can seem impossible.
I’ve seen someone pay off incredible amounts of debt making less than $50,000 per year. On the other hand, there was a person making over $100,00 that was stuck in a debt cycle and couldn’t find his way out. What’s the difference between these two people?
The first one was proactive. She could have easily said, “I don’t make enough money. I'll never get out of debt.” Instead of hanging her head in defeat, she fought back and won!
Here’s my secret to saving 10% of your monthly income: turn your budget upside down. Instead of paying off debt with whatever is left at the bottom of your budget, put that 10% at the top! Make that the first item you budget. Assign 10% of your income toward debt before you budget anything else. Then, fund your other categories with whatever is left. At the bottom of the budget, if there is still more money, add that as gravy to the 10%!
If the numbers genuinely don’t work, and you have only enough to pay the bills, then you have an income problem. It’s time to find a way to bring in more cash each month.
Make 10% More
This last one is for those that are all-in and laser focused on eliminating that debt! Find ways to bump your income by 10%.
Does your employer allow you to work overtime? Are you crafty or good with your hands? There are tons of ways to make extra money; you just have to find them!
Making 10% more doesn’t require a lot of extra hours either. If you’re working overtime, it’s just an extra 2-3 hours per week. Try mowing one neighbor’s yard each week, or donating plasma. There are so many quick and easy ways to make that extra money, and it will go a long way! Check this out for practical ways to generate extra income!
10% is just a guideline. I chose this number because it’s attainable and easy to calculate as you put it into practice. Don’t feel like you have to stop at 10%! Push those percentages as high as you can. The higher your percentage, the sooner you will reach your goal. Remember that this is only temporary. Once your debt is gone, and your rainy day fund is full, you can add this 10% (or more) back into your budget.
Be sure to grab my freebie for this blog post! It will take you step by step through the process of the 10% Rule.
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