Enjoy life and save for the future by splitting income using the '50/15/5 rule'
The Money Show’s Bruce Whitfield asked Warren Ingram, a financial advisor at Galileo Capital, how to divvy up his monthly income so that he can enjoy life, save for the future and not worry about money every month.
Ingram suggests following the “50/15/5 rule”, developed by Fidelity in the USA.
It’s great for those who don’t like to budget every month.
15: Save 15% of your pre-tax salary for retirement
Invest the 15% in a company pension plan or your own retirement annuity (RA).
If you are not saving this amount now; then arrange an annual increase in your savings.
For example, apply to increase your RA contribution by 10% next year.
5: Save 5% of take-home pay for short term savings
You should have an emergency fund that can cover three to six months’ expenses.
Ingram warns that this fund should only be for when disaster strikes, not unplanned expenses that are necessary but not an emergency (e.g. replacing a car tyre, fixing your smartphone screen, extra medical costs, maintenance of your car, etc.)
50: Spend 50% of take-home pay on essential expenses
Housing — mortgage, rent, property tax, utilities (electricity, etc.), homeowners’ insurance, and rates
Food — groceries only; not restaurant meals
Health care — medical aid and out-of-pocket expenses (e.g. prescriptions, co-payments, etc.)
Transportation — commuter fares or car payments, petrol, car insurance, parking, tolls, maintenance
Childcare — day care, education
Debt payments and other obligations — credit card payments, student loan payments, child support and life insurance
The rest of your total income can go towards entertainment, clothes, luxuries, holidays, etc.
Want to retire before you’re 65?
Saving and investing 15% of your pre-tax salary for 40 years should allow you to retire when you’re 65 years old.
If that’s too old for you; you’ll need to cut from “the rest” to increase your retirement savings.
For more detail, listen to the interview in the audio below.
Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning:
This article first appeared on 702 : Enjoy life and save for the future by splitting income using the '50/15/5 rule'
Craig Rocher on the criteria you must meet to claim for “home offices expenses” and which expenses are deductible (NOT the phone).Read More
Google services such as Gmail and YouTube don't work on Huawei devices, but there are workarounds, says Jan Vermeulen.Read More
Kieno Kammies interviews Chris Ormrod, owner of Paper Moon Bookshop (there’s one in Muizenberg and Woodstock).Read More
You can now deliver the stuff you advertised on Gumtree, says its General Manger Claire Cobbledick.Read More
"We deal with non-perishable food that is good for many, many years after the 'best before' date," says Dave Bester of Foodeez.Read More
Personal finance experts agree - RSA Retail Savings Bonds is having more than a moment, right now. Your bank simply can't compete.Read More
Bongiwe Kunene (MD, Banking Association SA) carefully and clearly explains the terms of the loan and who may apply.Read More
Distrust anything Covid-19 related that you receive from outside your trusted parameter, warns cybersecurity expert Brian Pinnock.Read More
Feel tempted to cash in your pension? Refilwe Moloto asks Andrew Davison (Old Mutual) for pointers.Read More
"The banks do not want to repossess your car," says National Debt Advisors CEO Sebastian Alexanderson.Read More
Personal finance expert Warren Ingram shares his concerns and offers a few pointers.Read More
Personal finance guru Warren Ingram on why you should consider this risk-free investment, especially if you live off interest.Read More
Personal finance expert Warren Ingram has advice on how to survive – or even thrive – amidst the Covid-19 outbreak.Read More
Personal Finance expert Maya Fischer-French on the pros/cons of dipping into credit insurance vs opting for a debt relief holiday.Read More
Warren Ingram, wealth planner, has sensible advice for investors in gloomy times.Read More
Markets are in turmoil in the wake of the coronavirus. How can you ''quarantine" your funds in a safe space?Read More
Wealth builder Warren Ingram on how the new budget affects you.Read More
The US market has a big impact on all markets and when they get flu, South Africa sneezes.Read More
We ask financial planner Warren Ingram to help get our tax ducks in a row.Read More
Personal Finance - Tips on how to invest your money.Read More
The Money Show's Bruce Whitfield chats to Opportune Investments fund manager Chris Logan.Read More
The Money Show’s Bruce Whitfield chats to CEO Jacques Celliers on the impact the day had on South African bankers.Read More
Bruce Whitfield interviews Sipho Hotstix Mabuse about his attitude toward money (hopes and fears, successes and failures, etc.).Read More
Small business guru Pavlo Phitidis shares shocking anecdotes and advises business owners on how to address this challenge.Read More
The Money Show's Bruce Whitfield interviews Daniel Baines, author of "How to Get a Sars Refund for Small Businesses".Read More
Bruce Whitfield interviews Jeremy Mansfield about his attitude to money (hopes and fears, successes and failures, etc.).Read More
Justice Albie Sachs talks about his attitude to money (hopes and fears, successes and failures, etc.).Read More
Bruce Whitfield interviews rapper Riky Rick about his attitude toward money (hopes and fears, successes and failures, etc.).Read More
Hanru Reyneke is on a mission to disrupt the used-car industry in South Africa by providing peace of mind to punchdrunk consumers.Read More
The Money Show’s Bruce Whitfield interviews Gradidge about his attitude to money (hopes and fears, successes and failures, etc.).Read More