Provided that your basic life needs for shelter, food, and clothing are being met, more money isn’t going to make you happier. I know that’s hard to believe, but it’s a proven fact. What will make you happier is learning how to manage well the money you have already.
Today, I want to give you a simple formula you can use to manage your money. It will work like magic in your finances, whether you have a lot or a little. Here it is: 10-10-80. Let me explain.
The two enemies of money management are greed and fear. The 10-10-80 formula knocks both greed and fear out of the picture. The first “10” in the formula is the money you are going to give away. Yes, just give it away with no strings attached and out of an act of gratitude for all that you have. I suggest you give away 10 percent of your income right off the top and before you do anything else. If you become a habitual giver, you won’t have to deal with greed.
Next, you save 10 percent for yourself, for the long term. Forever and always you must save part of whatever comes into your life. Some call that “paying yourself first.” And why not? You earned it; you worked hard for it; you’ve been blessed with an income. It’s your responsibility to look out for the future. Saving money to that end is just the right thing to do. If you become a habitual saver, you will never be broke. Fear of want will evaporate, and you'll make better decisions.
Finally, you need to arrange your lifestyle so that it fits within 80 percent of your income. Keep breathing, it’s OK. I know this is coming as a big shock to you, but just think about it for a few minutes. Living below your means is the best way to live. Living on 80 percent of your income keeps you miles away from The Edge—that horrible place where it feels like you’re just one paycheck from being homeless, where you can’t relax and you can’t sleep at night.
I know that adopting the 10-10-80 plan may not be possible right off the bat. After all, if you’re living on more like 125 percent of your income, you can’t reverse that overnight. Perhaps you can start with 5-5-90. Or 3-3-94. Whatever it is, the important thing is that you get started. Make a commitment right now that next payday, you will give away the first part of your check, no matter how small. Give it to a charity, your church, or your synagogue. Give it to someone who is in worse shape than you. Give it out of gratitude for all that you do have. Give it with no strings or expectations. You'll feel so good.
Take that same amount and stash it away for yourself. Even if it’s only $5, that’s a start.
Last, start focusing on every possible way to keep and spend less. Cutting back in every category is the way to make a significant dent in your bottom line.
This is what being Cheapskates is all about—giving, saving, and living below our means.
