During our generosity series (watch/listen here) I mentioned a simple rule that helped my wife and I start budgeting. It's not original. I've seen it numerous places. It's also not concrete. Starting this way has enabled us to grow beyond the 80/10/10 to where we are putting away more than 10% for retirement and giving away more than 10% to the church and missions. However, every great goal needs a simple beginning. The 80/10/10 was just that for us. Let's dig in.
The 80/10/10 rule goes like this: Live off of 80% of your income. Invest 10% in God's kingdom. SAVE 10% for the future.
Simple right? First let's talk about why the 80% part is difficult. Often we believe the lie that money (and the world for that matter) is all about us. Scriptures encourage us not to let our lives be consumed by money and what it can buy (Hebrews 13:5). Furthermore Paul told us we are blessed, not for ourselves, but to bless others that God might be glorified (2 Corinthians 9:11). Let's be honest. Living off 80% of our income feels like we are missing out. At first it might. However, once you realize you don't need a brand new car, bigger home or every new gadget, living off of 80% is actually comfortable for most people.
Here are some practical ways we've managed to live on 80% (even less now) of our income:
Drive dependable cars for the long haul
Let's address the reality of the situation. If your car has a decent stereo and AC that works, it's a pretty great ride by historical standards. Ten years from now nobody will care if you had the newest, fastest or most luxurious ride in the neighborhood. I've had my truck paid off for years. It turns 20 this year. I love looking at big trucks. However, I value $400-650/month too much to spend that on a truck I don't need. That money goes a long way toward living below your means. If you can avoid the big car payments in your 20s and 30s, you're freeing up margin for the future.
Never let the bank tell you which mortgage you can afford
Casie and I have never asked a mortgage broker how much house we can afford. We aren't interested in a house payment that eats up 30-35% of our income. This always seems to be difficult for young couples. We see our friends buy a big or new home and convince ourselves we are missing out. Hear me. Margin is freedom. By building margin into our financial lives, Casie and I have never felt obligated to keep a job or work extra overtime. I enjoy my work at FedEx and the church. She enjoyed teaching. We both invest some time in real estate investing. Our time and careers are ours to determine. There's no looming mortgage payment or debt burden that forces us to stay in jobs or careers we don't feel called or committed to. This has allowed us to both work primarily in the ministry/non-profit world. We can pursue our calling freely. Don't allow your desire for a model home rob you of your future freedom (eating out when you want, going on vacation, taking sabbatical, etc).
Avoid credit card debt
Let me admit something. I have a credit card. Casie and I have been using the Chase SW card for 4 years now. We've literally been flying free for 2 of those years by taking advantage of the points and companion pass. However, we weren't ready for a credit card at 22. We didn't use a credit card until we were close to 30. We always pay off the balance. In our 20s we were careful to avoid credit cards because we'd seen crippling credit card debt ruin people's financial lives. Many cards have 15-30% interest rates (just under what the federal government considers loan sharking). That kind of interest can kill your chances at an early pay off. When you realize just how much money you're losing to credit card lenders, you begin to see why it's such a lucrative business (for them). This gets into the good debt vs bad debt debate which I'll cover later in this series. I can't wait to continue the conversation on money myths in our next part of the series.
If you don't have a personal budget grab one here from our friends at Dave Ramsey Solutions. Tell your money where to go. Stop wondering where it went.