Savings Formula
Updated Date 5 Feb 2020
Personal financial planning starts from easy and basic formula as follows:
In this regard, most people (about 90% of the total population) generally implement the savings formula as follows:
The above savings formula means that most people, after earning income from work, often spend money as much as they wish whereas what they spare is the only left over for their savings. Do you think they will have money to save finally? Guess that no one will give the wrong answer. Such behavior of spending money without thinking of savings is called “Spend first, Save later” and this causes many people to have nothing left for savings. Are you in this group?
On the contrary, only few people (about 8-9% of the total population) implement savings formula as follows:
This group of people when they receive income, they plan to save some money first. After deduct savings money, then they appropriately spend the rest amount. Accordingly, they shall organize the proper financial plan for the money that left. Such behavior is called “Save first, Spend later” and this type of people shall definitely have some savings. However, the growth of their financial success shall depend on how much money they can save and how well they can manage their money.
The last group of people (about 1-2% of the total population) is the group of people who achieve financial success and have financial freedom. Their savings formula is as follows:
The key point of this group of people is “Savings Comes before Spending Money” so they can finally have lump sum of savings. After that, they manage their savings to generate an income or increase their income from other sources. They will control their expenses to be the same as previously and live sufficiently. It results that they will have more savings and can manage their money to generate further income. The returns from their well-organized management are income from their assets. Therefore, as they gain much more income repeatedly, it turns to be their wealth cycle. When income from other sources, not from full-time job (such as income from assets), is worth more than all their expenses, they will have financial freedom eventually.
