Understanding the 10/10/80 Plan
When it comes to credit counseling, you’ll hear a lot of counselors throwing around the 10/10/80 plan: the first ten percent of your income goes to God; the second ten percent of your income goes to savings; and you use the other eighty percent for your regular living expenses. It’s a great plan that gives you a solid set of guidelines, but what does it accomplish for you?
Designating the first ten percent of your income for God keeps your priorities in line. It’s a constant reminder, as every paycheck comes in, that you are a steward of the resources that God has given you, rather than the owner and sole beneficiary of all of your income. Having that regular priority check helps you remember what matters most whenever you’re making major purchasing decisions–and helps keep you from going into excessive debt just to have more “stuff.”
Designating the second ten percent to savings helps realign your thinking. If you’re living to the end of your paycheck and beyond it every month, learning to save before you spend can be a serious priority shift. When you’re accustomed to saving, however, you not only learn how rewarding it can be to see those numbers increase with each paycheck; you also learn the relief of having an extra cushion to fall back on when unexpected expenses crop up. It’s much more comfortable to visit the mechanic and know that you have the money in savings than it is to realize that you’re going to have to put it on your credit card…again.
Your Financial Future the 10/10/80 Way
The 10/10/80 plan helps you plan for the future. Instead of just thinking about your expenses in the present moment, you’re able to get a bigger-picture look at your finances. As you start to save, you’ll have the added benefit of having additional money to invest toward your future; you’ll be prepared for emergencies; and you’ll learn how to manage your finances responsibly, rather than burning through money as soon as it’s in your hands.
Living on eighty percent of your income forces you to prioritize. Because you’re taking the other twenty percent out first, that money simply isn’t there for you to spend–so you have to prioritize your spending. Obviously, the bills have to be paid first; but you’ll slowly learn which other expenses are really important to you, as opposed to the ones that are simply impulse purchases. Know that you have a big expense coming up–for example, a much-anticipated vacation, a vehicle purchase, or a home upgrade? Living on eighty percent of your income (and not beyond it) helps you learn how to put those things first and let the smaller impulse purchases go.
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