Lesson #1: The 10/20/70 rule
Dear readers of my monthly money making newsletter,
again I would like to thank you for attending the Richest Student on the Campus lecture earlier today. I am convinced that your financial future will now bring you even more prosperity!
By request I repeat the principle of the income division key, also known income division key as the 10/20/70 rule. Please apply this principle in as many situations as possible, so your wealth will grow faster and faster as time passes. You will soon be able to enjoy the beautiful resources the world has to offer you. Make a habit to use the income division key for the next thirty days.
The principle of the income division key or 10/20/70 rule
Each type of income you receive can be divided into three purposes, namely:
- The first 10% is yours to have. This is your investment to ensure future income. Deposit the amount on a separate risk-free (savings) account with a nice annual interest rate. Over time this amount grows, and soon you will have to find some experts to provide you with the best investment options for your future plans. Saving this 10% is for your own sake - it not only gives you a great saving habit, it also provides you with financial peace now and in the future.
- The next 20% is to pay back your debts. I recommend paying back your debts to ratio of interest rate, regardless of the amount of debt. For example, if you were to have two loans, a student loan with an interest rate of 5% and a credit card loan with 10% interest rate, then you should pay back your credit card loan with twice the amount you pay back your student loan. Note that most credit cards have an average annual interest rate of 16%, and your debt can grow very rapidly when you don’t take countermeasures. When you no longer have a debt (or your current debt is invested in purposes that generate a higher interest than you pay for your debt), you can use this 20% to save a total of 30% of your income, or donate a portion of it to goals you support.
- Live on the remaining 70%. You pay your monthly expenses with the last 70%. Make sure the total sum of your expenses - groceries, furniture, going out, clothing, etc. - does not exceed the amount you set aside for it. Learn to live on a budget, learn to live on less than you earn. Might you still have some money in your pocket after you saved, reduced your debts, and payed your expenses, then by all means take your partner to a nice restaurant or when you’re single go to a nice club! Don’t forget to enjoy!
Application of the income division key guarantees the first step toward massive fortune...
Your financial challenge this month
For the next thirty days, use the 10/20/70 rule on all your income sources. In case you are currently unable to save the full amount of 10%, then relax, don’t worry! Just save 5%, or even 1%. For starters an income division key of 5/10/85 is also perfectly okay. The most important thing I am making clear here, is that you got to take hold of your expenses and don’t give out the full 100% (or more).
Remember you can always go back to your old money habits and maintain the lifestyle you have now. But note that richness is only reserved for those with good financial habits. So apply the rule.
Perhaps you may have some questions now, or there is something about the income division key that you do not completely understand. Please don’t hesitate to contact me by email or by phone. I would be happy to provide you with answers for you current financial situation.
A toast for your financial freedom!
Having fun,
Mr Quintus C. Hegie, MSc
President of Q*-star Premier Business Club
P.S. The winner of a copy of the book ”The Richest Man in Babylon” receives a personal message from me.
Posted on 3rd September 2008 by Quintus Hegie
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