Your wealth is like a money tree. Every time you water it (save) it grows a little bigger. Mandy is here to help you make it rain…
Mandy’s S.A.V.E model
Saving can be a challenging endeavour. These days there are so many outlets for spending, and it is so damn easy to lose track of your money.
To beat these temptations, it is important to take a structured approach to saving.
That is where mandy comes in… her S.A.V.E model will act as a useful tool, allowing young people far and wide to create a tree this big.
Step 1: Sum your earnings
The first step is calculating how much money you earn/receive each month.
Tally up all cash inflows to reach a clear total.
This number will inform the coming decisions.
Step 2: Allocate earnings into three income buckets
Mandy uses three core income buckets and allocates a fixed percentage of her income to each of these buckets.
This percentage should not change from month to month.
- A spending bucket (day-to-day expenses) = 60%
- A short-term saving bucket (think travel or boujee winter jacket) = 15%
- A long-term saving bucket (the place for wealth accumulation – money tree baby) = 25%
Note that these percentages will be different for everyone, so make an informed decision based on your financial situation. Maybe you need to spend more on the day-to-day, or maybe you really want to focus on saving up for #Europe.
Step 3: Validate that these numbers work for you
Income x bucket allocation % = cash allocation to each bucket.
There are two tricks for seeing whether these allocations are sustainable:
- Measure your total expenses each month, it should be just below the spending bucket allocation
- Plan out the cost of your next short-term saving expense, will you have saved enough by the time you need to pay?
If these numbers don’t work, play around with the allocation percentages until they are sustainable!
Step 4: Execute your savings strategy
Now for the fun (but tricky) part – the execution.
This step requires discipline as you must follow your own saving guidelines. Try set yourself rules for transferring money into each savings account:
What day each month do you transfer? When are you allowed to access each savings account?
It is also worth considering whether you plan on investing those long-term savings.