What is one personal finance formula that you live by to help maintain expenses and create wealth?
To help you maintain expense and create wealth, we asked small business owners and professionals this question for their insights. From developing multiple streams of income to living beneath your means and giving back, there are several personal finance formulas that you can use to maintain your expenses and generate wealth.
Here are eleven best personal finance formulas to live by:
- Develop Multiple Streams of Income
- Set a Budget and Stick To It
- Make and Save More Than You Spend
- Seek Out the Best Deals
- Overestimate Your Spending
- Value and Invest in Yourself
- Account For Every Dollar With Zero-Based Budgeting
- Track Your Spending Monthly
- Deposit Any Extra Cash to Savings
- Set Clear Expectations With the 30/50/20 Rule
- Live Beneath Your Means and Give Back
Develop Multiple Streams of Income
You need to develop multiple streams of income, if you can. Just trying to get wealthy from one source of income is not enough to build the sort of wealth you’re imagining for yourself. Starting with the income stream you have now, add to it. Invest, if you can, as dividends from the right stocks or mutual funds can be another income stream. In general, the more income streams you have, the greater your ability to create wealth. — Carey Wilbur, Charter Capital
Set a Budget and Stick to it
Setting a budget and sticking to it is a tried and true personal finance formula that works for anyone of any age, in any business. Fiscal responsibility is never overrated. Knowing how much you have coming in and going out, how much you can afford to spend and how much would be too much, can prevent you from making costly decisions. This is one of the key foundations of creating and maintaining wealth. — Randall Smalley, Cruise America
Make and Save more than you Spend
I live by the formula of making and saving more money than I spend. There’s no better way to create wealth than being responsible with what you earn. Save more than you spend, make smart investments when possible, and don’t deviate from your long-term goals. Work hard and stick to your budget, and your wealth will continue to grow. — Vicky Franko, Insura
Seek out the Best Deals
I try to save money wherever possible and always try to find the best possible deal on an item. A penny saved is a penny earned, after all, so I do my research in order to earn. If I see something I like, I shop around to be sure that I’m getting the best price. The same principle can be applied to anything, whether we’re talking about books, TVs or, like with us, insurance. — Brian Greenberg, Insurist
Overestimate your Spending
When creating my budget, I always overestimate my spending for each category. I round up every number so that there is a buffer for unexpected costs, and I’m never cutting it too fine. I find this removes the feeling of being too restricted by my budget and letting it rule my life by being in the way of spontaneous moments. When in reality, a budget is there to make your life easier and help you plan for the moments which bring you great happiness. It’s barely noticeable to put away a little extra for each spending category but combined this adds up and allows you space to live more freely. — Antreas Koutis, Financer
Value and Invest in Yourself
You are your own greatest and most important investment. That’s how I see it. Be sure that you’re paying yourself what you’re worth, commensurate with the value you bring to whatever you’re doing.
And then, make sure you’re putting enough of that away in savings, whether it be for retirement or a rainy day. Don’t touch it, if you can, and just watch your balance grow. — Allan Switalski, LendThrive
Account for every Dollar with Zero-Based Budgeting
With zero-based budgeting, I account for every dollar of income that I receive every month. Using this method, I do not consider the remaining income from my previous month’s pay. I evaluate my total monthly income and distribute it like this: 16% for expenses, 63% for savings, 7% for investing, and 14% for wants. It may result in me not using the total percentage for wants, but I have the cushion available if I need it. — Annette Harris, Harris Financial Coaching
Track your Spending Monthly
Before I started to track my spending monthly, I felt like I was not acquiring wealth & was stagnant with how much money I had after every paycheck. Tracking your spending helps you with seeing where you are allocating your budget so that you can be wiser the following month & cut out spending when you do not need to. Though you can simply do this on a Microsoft Excel sheet, there are also many budgeting programs and applications out there to help you with saving money for the future. — Sacha Ferrandi, Source Capital
Deposit any Extra Cash to Savings
Any time I get some extra cash, I deposit it in my savings and leave it alone. If I spent money as soon as it came in, I’d be constantly living paycheck to paycheck. The temptation is of course there to just spend a bonus or a commission, but those are the funds I’m using to create wealth over time. By depositing any “extra” money I earn in a savings account, I am enabling myself to earn interest on that money, creating even more future wealth with little effort. — Lily Yu, Oak Springs Realty
Set Clear Expectations with the 30/50/20 Rule
Nothing beats 30/50/20. I love this one because it sets clear expectations and it forces you to stay consistent. 50% of your income goes to necessities, 30% goes to personal expenses, and 20% goes to savings.
I think it’s super important to make sure you create a balanced financial strategy, because austerity doesn’t work. You’ll eventually break down and start spending. This way, it’s easy to maintain, you’re still saving, and you never spend more than you can afford.
Live Beneath your Means and Give Back
The simplest financial advice that I would recommend to anyone is to live on 80% of what you take home. If you will always maintain that approach and smartly invest at least 10% of it and give another portion away, you will achieve financial independence and feel good about giving back to those less fortunate than you. — Austin Peterson, Backbone Planning Partners