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I wish I had discovered this method for overtime money a long time ago, I have been doing this for about a year with my overtime money, and I think this is such a powerful tool that I need to dedicate more time to incorporating this into this budgeting system. I would say that this alone lowered my stress level by about 50%. So the way we break down overtime is like this; 1/3 goes to savings, 1/3 goes to debt, and 1/3 goes to you for spending. There is a simple way to figure this out as well. There are always unexpected expenses that cut into any extra money you have, so rather than trying to figure out how much overtime money you have left on each pay day. You just figure it out once a month after all of your monthly bills are paid. Here is how you do that; You should always keep a minimum amount in your bill paying account (primary checking account) I keep a minimum of $1000 dollars in my account, I treat that amount as zero. This is just a safety net to make sure that I never overdraft my account. At the end of each month after I pay my bills, anything above $1000 in my account I consider to be overtime money. So at the end of each month, 1/3rd of that goes to Saving, 1/3rd to debt, and 1/3rd goes to my spend money. It is really important that you can get some reward for working overtime. Most of my life I focused first on debt and savings, and I always tried to live on a fixed amount for my spend money. This is really almost an impossible task, and I would always feel very stressed when I needed to take money from savings. Using this method, takes away a lot of stress, and I don’t feel so bad if I go out to eat or enjoy a few more things when the money is coming from my spend money account. Life has been a lot more enjoyable since I have been using this method, and I very rarely have to take money from my savings account. Once you get to a point where you have a smooth running budget you should save enough in savings to live for 3 months without a paycheck. Once this is achieved the savings portion of your income should be applied to your debt until you are debt free. Don’t pay your debt based on the interest rate, Always pay debt based on which loan you can pay off the fastest, then move to the next loan you can pay off the fastest. As you do this, each time you pay off a loan you will be able to apply that full payment to the next highest balance you owe. If you are able to get to the point of having at least 3 months’ salary in savings, then you need to learn to start diversifying your savings to protect your investments. The stock market has always been unpredictable. Its fine for you to take some risk there, but you also need to put some money is hard assets like Gold, Silver, real-estate, and even in crypto currency, you may even want to look into whole life insurance policy, there can be many benefits to this for taxes, and also for taking loans against your balance in which you pay yourself interest instead of paying it to the banks. |
Different rules for Overtime Money |