What's your Money Management style ?

Been a couple of months since my last article as I was experimenting with more regular shorter posts on a variety of topics that I have received a lot of good feedback - but back of my mind I wanted to pen another article and last night as I went to sleep I was thinking about what would be a good topic that would be reallly helpful to the readers. Hence the topic Article #8 on What's your Money Management style?

Before we get going on that, just a quick recap at where we have come so far across my article life journey. While this will be helpful for readers of my previous writings - this will be all the more helpful for those who are reading my articles for the very first time, to provide a quick referencer of everything I have posted since I began sharing my experiences and thoughts in the form of articles beginnig Jan 2022 starting with Where is Mr. Market heading? . This was followed by a couple of requested topics on Stock Markets again in Feb 2022 on Pyschology of Succesful Long Term Investing and another article on Your best way of Long-Term Investing. Then as we entered into March 2022 encouraged by popular request I wrote a little piece on Learning to get Started in Crypto just as the Biden Adminstration came out with an Executive Order on Ensuring Responsible Development of Digital Assets and finally closed out the month with one more article on my stock market series with The Best way of adding stocks in your portfolio.

As we finished Q1 and entered into April, we all realized that Inflation was burning on full steam and the Fed was after all not really having any clue (they still don't as of today) unless you think rising interest rates will get everything back to normal - which it won't of-course without a hard landing in sophisticated terms (in plain language think recession, more stock market volatily, unemployment and more pain amid forced demand destruction that will entail). With this in mind I had wrote a piece in early April once the CPI report had come out showing that inflation rates were the highest it's been in the past 40 years on my topic Living in a high-inflation environment. If you hadn't checked that out - I would say it's all the more pertinent given where we are still with sjy high inflation as we are rounding out the end of Q2 22. Given the markets were continuing to be in a turmoil and that holds very true even today while treading through #bear markets with no end in sight just yet - I followed this with sharing my thoughts on my next article on Alternative Investing - Looking beyond stock markets. As a continuation of my thoughts from that article, I followed this up with a recent post (appended below) earlier this past week to much fabulous reception where I shared with my readers some of my favorite alternative investing options outside of the stock markets given the continued volatility and to share some options that could help to bring in some much needed portfolio diversification that you may not be familiar with.

So then all this got me thinking going back to last night in terms of how I could add value and bring in some big picture perspective amidst all the chaos. That's when it struck me to start right at the top of the pyramid and the very basics #Money Management. For starters the technical definition of Money Management if you searched Google would say something around the lines of how you handle all of your finances, from budgeting to investing, to saving and setting goals etc. It doesn't take too long to realize pretty quick that everything "financially" in life begins and ends within this terminology so what better than me sharing my personal life rule with you all. Full disclosure what I will be detailing below has obviously drawn inspiration from all the reading that I have been done over the past several years and for the first time here is my little secret. Read on to know more....?

I call it the #Rule of 40:30:20:10 in life towards money management. I strongly believe if you religiously follow this your life will be so much financially secure and be able to withstand any temporary shocks and setbacks that life can throw at you from time to time.? At the very outset I realize this is a big claim to make and I realize a topic such as this has no universal right or wrong % of allocation of your finances towards anything; so this is just my #personal take and approach that has helped me and I would encourage you all to see where you stand today and if you like what I share below - to try this out as your new starting point and then adapt as it may apply to your #personal scenarios and then see the magic of pure financial bliss as the months and year pass by in terms of your mental health and well being on a stress scale standpoint once your plan of action is set in motion.

Ok so without further ado; here are my money managenment rules on how I allocate my income stream and finances and that defines everything that I look into in my life to keep things simple and allow me to focus on higher priorities:

First Bucket: Aim to allocate 40% of your income always - Savings (think emergency funds) - could be between 5 to 10% but no further because it will result in portfolio ineffiency vs Investing (stocks, bonds, crypto, real-estate etc.). Important that you don't save too much and sacrifice investing so try to stick with around 5 to 10% max. on the savings side of things and ensure the rest goes towards investing so say around 30% to 35% etc. This will ensure you prevent portfolio inefficiency vs investing and allow your pot to benefit from compounding. I would love to in a whole lot detail on asset allocation and portfolio management but that will be an article for another day.

Second bucket: Don't spend no more than 30% of your income on basic housing and or personal transport requirements (think again home mortgage, taxes & maintenance / or rent + car loans / fuel ) as you will get #overleveraged if you have a sudden drop in income and or be forced to cut down else-where.

Third bucket: Try to keep your monthly routine and necessary expenses to max 20% of your income. This will be your all inclusive bucket think groceries, food (eating out), electricity, gas, internet, telephone, streaming and other recurring subscriptions etc.

Fourth bucket: The last 10% is my personal favorite - #Discretionary bucket. You can look at this in one of two ways.

Given life is #unpredictable and while planning for the long hey days of retirement is obviously good, it's also important to have #fun and spend it on things that do you and your family a #personal feel goodness - this could be anything from vacations and holiday travels, pursuing a field of study, buying and reading books, spending on other hobbies / interest, giving away in charity if you are in that sort of thing or just buying that fancy item you had longed for but hadn't because you didn’t want to feel guilty splurging or weren't sure if it would fit in your finances.

The second way to think about this last bucket is it could work well for different individuals based on their lifestyle needs / risk appetite as well as personal choices. This additional 10% buffer could be useful for those who are more aggressive in their financial goals and help top their first bucket to 50% and help them save/invest?more or for some others who may want to live a really amazing life in that fancy expansive house you have always dreamt or wanted to drive that flashy new EV could help themselves because they may need more likely to have their second bucket hit around 40% of their income to achieve that.

Either ways when it comes to finances and money to each is their own as as there is no right or wrong allocation of your financial matters as you are the judge of your life and finances and you and only you will be responsible for what happens.?

“Life is really simple, but we insist on making it complicated.” – Confucius

In summary, we all try to overthink things in life.?We try to make the easy more complex because we think that if it was easy, everyone would be doing it.?When it comes to your money, finances and investing do not overthink it.?Simple is almost always better in the long run.?If you try to make your process too complex you will never stick to it.?Or it may work once but never again.?So apply a little common sense?and come up with a money management plan in life that works for your personal situation. Creating a plan ahead will allow you to take your inherent emotions out of the equation. Unless you have a money management plan in life, it's really difficult to develop a systematic plan to manage and monitor your finances and ultimately your well being. There is a reason rules exist, so plan to come up with a systematic repeatable process to help your future self set up for long term success. Let me know what you think and how you would adapt your money management style in the comments below and thank you for reading.