• Paul

The 3 stages to money success (part 1: know your numbers)

Managing our money can seem like a daunting prospect, however, with the right basics in place it can be relatively straightforward. Implement these 3 steps and you’ll be on the path to money success.

Part 1: Know your numbers


First up, know your numbers and your percentage splits. In other words, how much have you got coming in, how much is going out and what’s it all going on? Knowing this and getting the right percentage splits each month is the most surefire way of creating a system that gets you results. Not only that, if you get it automated with direct debits and standing orders you might just find your stress levels are reduced.


So, grab a piece of paper and write down the following:

  • On the left hand side

  • How much you / your household has coming in each month after tax

  • On the right hand side

  • How much goes on the essentials (mortgage, food, bills)

  • How much goes on lifestyle (holidays, luxury items, eating out etc)

  • How much goes on savings (into ISAs, cash savings or pensions)



A good rule of thumb for percentage splits across these areas is 50/30/20. That is, around 50% of your money going on essentials, 30% on enjoying yourself in the here and now and 20% on savings.


We should also say at this point - these percentages are a guide - if you have specific goals, you may want to have a chat with a financial advisor or do some more detailed financial life planning. You might find that you can spend more on lifestyle now, or, that you need to put more away to achieve your future goals or retirement objectives..


To get saving automated, the best thing to do is set up a standing order or direct debit for the day after you get paid. This moves the money out of your account and into savings before you even know it’s there.


For some, putting 20% of their hard earned cash into savings each month can feel like a limitation on their current lifestyle. If that’s you, just remember you’re putting money into your freedom fund. You get to spend it on your lifestyle and luxuries, just not quite yet!


Not only that, growth on money you save can become extremely significant when you’ve been doing it for a while. Over time, the 20% you’re putting in, can be matched or even doubled by additional growth each month [1].


So the new budget should look a bit like this:



That’s step 1 on our 3 steps to creating money success, check out part 2: Disaster protection.


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If you would like to speak to a financial adviser to make sure you’re on the right track, get in touch or arrange a call back.


[1] based on 7% net annual growth, an investment of £12,000 per year will earn an additional £13,050 in growth in year 11 and £23,150 in year 16. This is also known as compound interest. Growth rates are not guaranteed.