By: Juan Diego Morales
Two months ago I got my first paycheck. I felt like a millionaire. Two weeks after that, I was as penniless as one can be. I was flabbergasted about how I burned through so much money in such a short amount of time. Then, I learned the “exponential rule”. It consists of dividing your money into four categories, each one getting smaller and smaller amounts. One category for Saving, another for Investment, another for Good Works and the final part for Luxury.
Saving (40-50%)
The first category is quite simple. First, you should set apart 40-50% of your earnings. Then, that category can be divided into two subcategories. The first subcategory, is an emergency fund for difficult times, this subcategory shouldn’t be touched at all unless there is an emergency. For example, if you drive then it’s very essential to have an emergency fund in case anything happens. Another example is if you are constantly out-of-the-house with activities or hang outs. In general, it’s important to have a cushion in case you aren’t immediately by your parents. Which will be frequent when you begin to become independent. The other subcategory is what I call the “Independence fund”. As we grow up we need to begin to act as adults. A great way to do that is to buy your own clothes, shoes or anything that you need to buy from time to time. I would like to clarify that the Independence Fund is only important things. The main idea of this fund is to help you appreciate the value of money by helping you plan what you want to save up for and weighing your own priorities.
Investment (30%)
The next category is the investment category. When I mention investment, I don’t necessarily mean stock and crypto. It could be, but what I mean is personal investment. Generally it means to save up for things that make your lives easier and therefore save you time. That could be data/ internet, saving up for headphones, etc. Little things that make your life a bit easier. Now this isn’t the self luxury category. It’s a part of your money that isn’t spent immediately. Its spendenture that should be planned and done wisely.
Good Works (10%) & Luxury (10-20%)
The good work section is one of the most important in my opinion, because you use the 10% for tithing and otherwise being generous with the people around you. It’s important to have a heart of generosity and compassion.
The rest is to do whatever your heart desires. Do you wanna buy a game, eat something, or just want to do something? This is the part of the fund for it.
These are the rules that I have used for two months, with success, to manage and steward what I have earned. I truly hope this is helpful for you too!
