70-20-10 Rule Demystified. Saving First Before Investing.

While investing and trading gives a bigger gain when done properly, one should have the minimum amount to trade or invest. Stocks investing requires a minimum amount when initiating your trade. Even mutual funds have minimum amount before you can actually buy shares. Same goes with Unit Investment Trust funds from banks. What does this means? Well, if you are a first time investor, it is good to know the minimum amount before you start. This won't be a problem if you are earning big income regularly but how about those with just little income? If you are the one with the little income but willing to start investing with stocks, mutual funds or UITFs, then what I advise is to keep a portion of your salary regularly every month. You don't have to oblige yourself to invest the minimum amount every month just to add to your investments. You don't have to sacrifice your own lifestyle and other important expenses for your stocks and other paper assets. Use the 70-20-10 rule The 70-20-10 rule is a way of allocating your income every month. 70 percent goes to your expenses, 20 percent goes to your savings and 10 percent goes to tithes. I will explain each of this allocation below. [caption id="attachment_18198" align="aligncenter" width="448"] From http://www.iedp.com[/caption]   70 Percent for Expenses Other than change and death, Expenses is one of the inevitable things in life. Technically, we need money to live and thus we spend. A big portion of your monthly income should go to your life's operational cost. This goes to life's basic needs such as food, shelter, clothing. Buy your groceries and toiletries with the 70 percent. Pay for your monthly rentals or mortgage and don't skip one for it can accrue penalties. As clothing is one of the basic need, you can also spend this allocation to buying some clothes but avoid overspending and just buy what you can really afford. As technology became part of our daily lives, some items became necessities to other people such as internet connection and mobile phone services. 20 Percent for Savings So, now since you can't invest or trade regularly due to low income, you can begin with saving. Let's say you are earning 10,000 per month. 20 percent of 10,000 will be 2,000 pesos. Don't spend this to pay for something else other than yourself. By paying yourself doesn't means buying yourself something new - new clothes, new gadget or getting pampered at a spa but putting this amount to something you can spend 10 or 20 or 50 years from now. Think of your retirement because when you retire and don't have any savings, you will have a difficult life - something you don't want to happen when you retire. 10 Percent for Tithes Do you believe in giving and sharing your blessings to other people you know and don't know. Give a portion of your salary to people in need - they can be your neighbor, someone you meet in the streets, or your chosen organization. You can also give this as an offering to your church. Don't be greedy, give that back to your provider by doing some great deeds and it will be returned to you again thousand-folds. Hope this article helped you learn about the famous '70-20'10 rule you will encounter reading personal finance blogs just like this one.

Mark Hugh Neri

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