Achieve financial freedom of your family using 50/15/5 rule

Financial freedom using 50 15 5 rule. The magic mantra to financial freedom for any family or person is: save money and get out of debt. Live a frugal life as much as possible. #saving #moneysaving #financialplanning #frugal #frugalliving"
The magic mantra to financial freedom for any family or person is: save money and get out of debt. Live a frugal life as much as possible. So, what is the most serious mistake in achieving financial freedom? Is it “not saving money”? Yes, something like this. It is, spending everything. One cannot save when he/she spends everything. So, how can we set boundaries in spending money?

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Use your carrots to save money

Have you ever seen that scene in cartoons — A cart driver activates a reluctant horse by dangling a carrot in front of it? We can save money by dangling a big fat carrot like that. For example, if purchasing a house or an apartment is high in my priority list, I would set a goal to save to reach that target quickly. Everyone needs to find his/her carrot.

We make our lives easier by spending money. How is that? To avoid the morning rush, we do not take lunch from home.

Every month, we spend hundreds on lunch. We can save the “lunch-money” by making a sandwich the night before every office day. It is easy to save several hundred dollars on lunch every month with just a little bit of planning.

Fidelity’s 50/15/5 rule

50/15/5 rule is a saving and spending rule of thumb. The rule is: spending no more than 50% of income on essentials, saving 15% on retirement, and saving 5% for emergency. A brief discussion is as follows.

The magic mantra to financial freedom for any family or person is: save money and get out of debt. Live a frugal life as much as possible. What is the secret in achieving financial freedom? #saving #moneysaving #financialplanning #frugal #frugalliving Financial freedom | money planning | how to save money | money saving | |Frugal living| Finance |

Do not spend more than 50% on essentials

Do not spend more than 50% of your take-home salary in essential expenses like housing, food, healthcare, transportation, childcare, and other obligations. Take home salary is the salary that you receive every month after the tax and benefits deductions.

Save at least 15% for retirement

Some employers have contributions to make it 15%; some don’t. I prefer to set an automatic transfer to my retirement accounts every month to ensure that I save 15% of my total salary.

Save at least 5% for an emergency fund

An emergency fund is a must for every family. Flat tire, wedding invitation, broken smartphone, and more serious emergencies can be covered from this fund.

Hey, what happens to the leftover after 50/15/5 rule is applied

Keep it. It’s all yours. 🙂 There are many other items that need more attention, such as, a college fund for each kid. If I am done with college funds, I would focus on dumping leftover amounts to my retirement accounts. I will also try to invest a part, as much safely as possible.

From A Family Blog: Settle in El Paso

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8 thoughts on “Achieve financial freedom of your family using 50/15/5 rule

  1. I am a little skeptic about saving or not spending money. I often tell my saver friend that I am an earner. I am one of those most people probably laugh at because I believe in the law of attraction. Holding back to me signals the mentality of scarcity. But, that’s just me. I don’t squander, but I buy Jimmy Choo because no matter how superficial, those shoes make me happy. When I am happy, I attract more happiness. When I live in luxury, I welcome more luxury, but that’s because I am not afraid to work hard or work over and above normal work. From a religious perspective, I am reminded by Matthew that even the birds don’t worry. God provides. Savings is like worrying about the future that may or may not happen.

    I also believe in living life to the fullest. It bugs me to think that some people would die, not having “lived” but denied themselves of “luxury” in the name of saving for the future. They worked hard, earned the money, saved for the future, they died without having traveled or enjoyed the fruits of their labor, and the hard work was enjoyed by those left behind, possibly not as hard-working as them.

    If I happen to grow old and my financial situation changes for the worse, I don’t think it’s not a bad thing to live simply, back in the island, where I was born. “From dust and to dust we shall return.” Something like that. I didn’t always have what I have now and should I return to less, I should manage. 🙂

    HOWEVER, I do have life insurance, disability cover, medical aid (insurance) and pension (provident) fund ( qualifies as savings, but this is forced [by employer]).

    I have lived many years of my adult life like this and I have been blessed to not have lack. I have debts. I have no savings. But, I have a home that is valued almost double what I still owe, and I have just bought another property (funded by the bank). My financial records might show a nil net asset or even negative but my lifestyle welcomes more good stuff. But, I do know that it doesn’t work for everyone. It helps to have a profession/job that pays well but does not consume life completely.

    1. Thank you so much for such a detailed comment. I agree with you that saving has different aspects for different people. Also, saving strategies may vary from one country to another. It varies between job to job as well, as you indicated. A 401k, with employer contribution, with a job reduces the need of extra effort in saving too. Therefore, this is a multi-faceted topic. Just remembered a joke — Bill Gates giving his child one million dollar in his will is comparable to we giving our child one penny. 🙂 Thank you so much again for complementing the post with such a detailed comment. Have a wonderful weekend.

    1. Glad to know that you liked the post. Definitely, the percentage may vary from location to location. The basic idea is to keep a financial plan in mind, as you indicated. Thank you very much for visiting and commenting. Have a wonderful day.

    1. Glad to know that you liked the post. Thank you for visiting and commenting. Have a wonderful weekend.

    1. That is so great. Definitely, paying off the mortgage is a big step. Many many congratulations. Thank you for visiting and commenting.

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