In our own personal finance over the years, we have followed a sort of 10 10 80 approach to money. We found this worked well for us; only now do we discover how this is a method used more widely by others. Let me stress I am not advising anyone to follow this, although it might possibly be worth considering.
This is the breakdown of the 10 10 80 approach to money:
Give 10% away
This is something we have always made sure we have done with our income, right from the start of our married life. We do take account of the generous UK Gift Aid wherever possible.
We have always had a separate bank account for giving, so at the very start of the month we transfer money into the account. Some of it goes out straight away through standing orders and some remains in the account for ad-hoc giving. Once the money is in the giving account, it never comes back to us and we have always been very disciplined about this.
You might ask why do we give money away? Why 10%?
As Christians we believe this is a good thing to do. It certainly doesn’t buy our place in Heaven at all but it is honouring God. You could argue it is really a case of giving back to God what already belongs to him. In terms of “giving back to God” this often means supporting our local church and, for us, it doesn’t have to stop there. We have always given money elsewhere, to other good causes or to individuals as the need comes along. We sometimes use Stewardship which is useful for anonymous giving, also you can use cash for anonymous giving if you go about it the right way. Everyone should give at least some money away, it doesn’t matter what faith you have or even if you don’t have any faith at all.
We have always aimed to give a minimum of 10% but have never been too legalistic about this. It is a guide as it doesn’t say anywhere in the Bible about “thou shalt give me 10% or else you’re going to hell”. We give because we want to give. There are probably occasions when we might have given more but we have never been overly neurotic about this. We have nevertheless always been keen to do the right thing, recognising the way in which we have been seriously blessed.
Save 10%
This is a good habit to get into from an early stage. Depending on your income, where in the world you live, your long term needs and plans, this might not be enough. Nevertheless we have always tried to work towards this.
The reality, however, is that we have not always been able to afford this. In our early days, we had a mortgage and getting that paid off in eight years seemed more important than saving. We have always had a reasonable buffer for emergency repairs and so on.
Getting into the habit of saving 10% will certainly pay dividends, especially if the return on the investment is good. Nowadays the returns on low risk investments seem so meagre, with cash deposits not even matching the inflation rate but saving is still a good thing to do.
It has always seemed sensible to have money available as cash, just in case we suddenly need to buy a new washing machine, car or central heating boiler. All of these things have cropped up for us over the years and it has been comforting to know the cash had been there. Some suggest 2 or 3 months of your monthly income saved as easily accessible cash is a good amount; this seems sensible.
Spend 80%
Using the remaining 80% of income for spending is sensible. In all honesty this has sometimes been difficult for us and for some extended periods we have exceeded this amount, especially during the years when we were paying two lots of school fees. Actually I’m going to blog about school fees in the future as I have mixed feelings about this.
At times when we have had money pressures, we have taken money from our savings and later replenished the savings; we have always valued having some accessible savings to allow us to do this.
To keep an eye on our spending, we have always had a spreadsheet where we have budgeted a certain amount for different things (clothes, utilities, food, running the cars and so on) and then tracked our spending to see how close we are. Normally we are pretty accurate but it did take a few years to settle down!
Wrapping up
The 10 10 80 approach to managing our money has served us well, even though we haven’t always adhered to it. Sometimes this has been because of certain pressures, other times because we have simply changed our minds and been a bit more spontaneous. As I have said elsewhere on the blog, we are just ordinary everyday people and not super rich!
Having the discipline of standing orders automatically distributing money here and there has worked brilliantly for us. As mentioned, once money has landed in our Giving account, it doesn’t come back to us even though it may not be immediately given away.
The bottom line is that it has worked.
Please feel welcome to leave a comment below if you have used something like this 10-10-80 approach to using your money. Did it work? Do you do something different? Do you disagree?