The 80/20 rule for money, part of the 80/20 way is about saving 20% of your salary and using the remaining 80% for your normal everyday expenses.
This money saving formula works to strike the balance between your saving and spending. It enables you to provide for all your basic needs whilst saving for the future.
There’s an Old Scottish Proverb “Gude health is better than wealth” (Good health is better than wealth)
It’s true. We can live a fantastic life and be able to accomplish everything we want to – as long as we have good health.
But, you can also lessen the pressure of worrying about money and the stress that can bring to your health and wellbeing by using the 80/20 rule for money to become more financially sound.
You see, not only do the principles of the 80/20 way encompass the 80/20 rule for eating, but they can be applied to our finances too.
By following the 80/20 rule for money we create more time for ourselves. We alleviate money worries and we build a “nest egg” for our future.
The 80/20 rule for money can help to remove your worries about money.
I worried about money all the way through university and through my early career years. I worried about it more then because I’d overspent at university.
I’d been through a series of relationships where I’d racked up a large amount of credit card debt. There were student days where I ate from a can of tuna…….
Worrying about money frequently made me feel ill.
As soon as I had a steady income, I was determined to get to a level plain where I could start to build a life free of money worries as much as possible.
I am now doing that by saving 20% of my income and living off the rest. Living within my means.
Here’s where I started and what I use to remain focussed.
How to start applying the 80/20 rule for money.
As the 80/20 rule for money starts by striking a balance between saving and spending you need to create a budget and eliminate all but essential spending.
I know you’re probably thinking that’s easier said than done, but as an avid reader, I’d like to recommend two books (these are affiliate links) that were the most beneficial to me in setting up my 80/20 savings habit.
The first is The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness.Dave gives excellent practical and simple advice.
There are a series of 7 baby steps which Dave describes in detail that will get you into a position of being able to save 20% of your income monthly. Then Dave goes on to recommend where you might save that 20% for the best results.
Once you’ve read that check out Money Master the Game: 7 Simple Steps to Financial Freedom to help you cement your savings strategies for your financial future.
Tony has interviewed some of the world most successful investment managers and they gives their advise for free within that book as to their successful investment strategies.
UK readers might be surprised for me to recommend two American authors above and none closer to home. I just haven’t found anything as good by a UK author yet!
However, I do follow a couple of excellent weekly Podcasts by UK Financial experts and they are :-
Again, those are my personal recommendations and I’m not a financial expert. They Podcasts both have large U.S. audiences too and again offer practical and simple advice as do the books!
There’s so much more to write about here with regards to saving via the 80/20 rule for money, but the above is a great start.
In summary, my aim in providing the above information is to show you how you can apply the 80/20 way in all aspects of your life. For better health, wealth and happiness.
And remember “less is more”. 🙂
I am fortunate in that I’ve always saved a lot of money and balanced that with fun and travel. I’m lucky i did this because with my medical issues last year I was forced to quit my job and start over. Thankfully, I had money to fall back on. Not many people could say that. Now I want to read these books!
That’s good sense that you had savings to fall back on when unfortunate circumstances took over last year Megan.
I read that 66% of Americans don’t have enough savings to fall back on in an emergency and it’s probably roughly the same as that here in the UK!
If I’m ever asked to recommend just 2 good common sense financial books, then it’s these two.
Dave Ramsey’s first because he takes you from having debt and no emergency savings right through to having no debt, emergency savings and a growing future income. Then Tony Robbins inspires you to do the very best with the money that you’re saving by giving advice and options of where you might invest that, based on interviews with some of the worlds very best financial guru’s. 🙂
Hey there! Thanks so much for the mention much appreciated. I love it when people simplify money in ways which totally work, just like the 80:20 rule you mention here. Thanks for listening to the MeaningfulMoney podcast, and keep up the great work!
Hi Pete, wow! I’m honoured to have received a comment from yourself on my blog!
Thanks for taking the time to reach out and comment, I really appreciate that.
I’ve been listening to your MeaningfulMoney podcast for a good 6 months now and it really is superb, simplifying the gobbledygook of financial jargon that the financial world seems to so enjoy for the normal everyday person to be able to understand.
I’ve a couple of episodes to catch up with, but when I do there will be a full review from me on itunes! 🙂
Thanks again Pete. 😀
Neil I so love how you apply the 80/20 rule for finances too! A little discipline goes a long, long way! I’m a huge huge fan of Dave Ramsey’s – I love his book and listen to his radio show often. This week, I stumbled on a comment that said “It’s not the salary you make, it’s how you spend it” so so true! Awesome post, my friend!
I’m so glad you’re a huge fan of Dave Ramsey’s too Shashi! 🙂
My favourite Dave Ramsey qoute is “If you will live like no one else, later you can live like no one else”.
I firmly believe that saving hard and not buying crap that we don’t need will one day give us an income from our savings that will allow us to continue travelling the world, writing this blog and working less! That’s the plan!