Setting Salary with Formula 4 3 2 1
Have you ever felt that after your payday your money evaporated somewhere without any leftovers for future investments or emergency funds just in case? Well, a salary that feels like just passing through is really annoying.
Sometimes we forget ourselves in spending money so we don't realize that there are still many installments and needs. Well, that's the reason why managing finances is very important to do. If you are still confused about how to do it, the 40-30-20-10 formula is the way you can try.
This formula is universal, meaning it can be applied to any salary range
Allocate 40% for living expenses and routine expenses
The figure of 40% is the ideal percentage allocated for routine expenses and needs that must be met. These needs are in the form of daily food costs, water, electricity, credit, internet, transportation and so on.
Try this allocation to cover all needs, from basic to recreational ones, so you don't have to take them from other posts to keep the proportions balanced.
Allocate 30% for installments and bills
Having debt and installments is not always bad, as long as the debt or installment is used to buy productive assets.
Examples are mortgages, vehicles and equipment for mandatory needs. If you do not have your own residence, funds to rent a rented house can also be included in this allocation.
Try to avoid going into debt for things that are consumptive, such as buying luxury gadgets, jewelry or other things that you don't really need.
Allocate 20% for savings
The next way to set your salary is to set aside 20% of your salary for savings. For this allocation, you can divide it into several more posts, for example for savings, insurance, emergency funds or investments.
You don't have to be stuck like that either, you can be more flexible in adjusting the allocation to your income and financial situation as long as the percentage is not less than 20%.
Allocate 10% to do good
Allocations set aside for good mean expenditures used for charity, alms, donations or tithing. Giving a portion of our income to parents is also a good thing.
10% is not a mandatory number, if you are still earning mediocre you can reduce that percentage but try to keep it there.
On the other hand, if you are already successful and your income has increased, there is nothing wrong with allocating it in a larger amount. That's it, let your fortune be a blessing.
If the allocation is still not sufficient for you to apply, it means you have to fix your financial management, you can work around this by working harder to increase your coffers or adjust your lifestyle to the existing income.
That's an easy way to set your salary with the 4321 formula.
