3 Portion Rule
While I have always had a strong personal budget, there have
always been 2 things I have had a hard time figuring out in
my budget. That is; how much money should go to my
retirement fund, and how much should go to the church or
charity. I know the Bible says 10% goes to the church, but for
many people especially those that never learned to budget, it
is not possible to start giving at 10%. It takes time to reach
that level of giving.
So when you don’t have enough money to give 10% what are
you supposed to do? As I am always looking to learn about
managing money I came across the 3 portion rule. It’s not an
exact science, but I think it is a good place to start. And not
only is it a great idea, it can work for anyone to give you
starting points for a retirement fund and charity regardless of
if you are an employee, business owner, or investor. If you
apply this, your tithing may start at less than 10%, but over
time it should become more then 10% of your personal
income. The purpose of the 3 portion rule is to give you a
starting point, and it also adjusts as your budget changes.
Here is how it works;
After all of your monthly bills are paid, the money you have
left “also known as your monthly positive cash flow” should be
split into 3 equal portions;
1/3 goes to your retirement fund. From the moment you first
start to make money this money should be put away never to
be touched in your life unless you retire.
1/3 goes to you for your personal savings, spend money, and
investment. This is your personal money to manage for your
needs and also to risk in investment.
1/3 goes to charity. If you want to give, this amount will show
you what you can afford to give, this could be more than 10%
of your income or less than 10% depending on your personal
monthly positive cash flow. In the long run if you learn to
manage your money this amount should become more than
10% of your total income.
This is a very strong money management tool, if you’re giving
allowance to your kids, start the 3 portion rule from the very
start. Since we get virtually no education in school on
managing our money, this is one of the greatest gifts you can
give to a kid to get ahead in their life. If you want to make it
more enjoyable for your kids, let them pick a charity for their
tithe money, most churches will buy Christmas gifts for poor
families, or help feed families in need, there are lots of
charities to choose from, even if you’re not religious. Let your
kids experience what it means to give.