It’s been a long time that I’ve been reflecting… alas, I’m writing my first post to share my findings and discoveries on personal finance. I will certainly have the occasion to write regularly on the subject.
For this first time round, I want to harken back to something extremely important: savings. There’s a rule in personal financial planning that says we should systematically save about 10% of our net income right away, yes, yes, you’ve read correctly, now, today!).
Whether it be for retirement or to constitute one’s emergency fund for 3 months, don’t wait! In fact, the longer we wait before saving, the greater the risk you’ll have of making big sacrifices later on, which will surely entail a reduced lifestyle.
I recently read an extraordinary book, one of the rare ones on personal finances in French, written by David Chilton, one of the “dragons” on the show Dragon’s Den in Canada. It’s called “The Return of the Wealthy Barber”.
The author struck my imagination by reinventing The 10% Rule. Considering that few amongst us actually save sufficiently, but we’ve rather mastered the art of spending, he suggests an original way to attain our goal: save only 4% of our salary, but cut 6.25% of our spending. Admittedly, this seems a lot more reasonable! We just hadn’t thought of it before…
What’s most surprising is that this approach (that he explains in detail) increases the rate of savings by 150%! Pretty awesome, wouldn’t you agree? A new way of tackling it all; perfect for those who are more inclined to reduce their spending than saving their money!
However, life will no longer be easy: cutting 6.25% of your spending demands discipline and restraint. To put chance in your favor, limit your access to credit: destroy your excess credit cards or those from big chain stores and be conscious of your spending by identifying where your money’s going. You’ll be surprised to notice at what point the additional spending on one thing to another can quickly add up to unexpected amounts.
As for you, where will you cut your 6.25%?