Are You Following These Essential Money Routines Every Time You Get Paid?
- Noah Avery
- May 23
- 2 min read
Money educators like Dave Ramsey and his team promote the importance of having a system as soon as your money comes in. I have found this to be the most important thing when I look back at growing my net worth from negative after college to around $700,000 at the age of 28.
Here are the buckets that I have maintained over approximately 7 years:
Investing Bucket
Tax Bucket
Personal Spending Bucket
The importance of those to me is the top down. Invest first, then find a way to live on the rest. Don't try and create your ideal lifestyle at the beginning stages and then invest whatever is left over. Think of investing as paying yourself first.
How about percentages?
For me these percentages are:
50% of gross income invested
Real Estate
S&P 500 Index
20% for tax payments
Self employed so I pay a year later than making the money. The following year of saving 20% for tax helps me pay my full balance.
30% for personal spending
Living expenses and other things I like
Tool that helped me:
iPhone notes
I have a note in my iPhone called "Accounts Payable" that I've maintained for around 7 years. It's essentially just a piece of paper where I record money I owe. This money owed includes money I owe myself. If there are times when I can't make the full 50% investment for example, I'll add the amount I'm below the 50% to the note. Right now, I'm $1,171.98 below the 50% investing rate across the 7 year time span.
Minimum Investing Percentage
25% of your gross income is the minimum I recommend. How much you invest is the biggest factor especially at the beginning stages.
Example:
Thinking in ratios:
If you have $25,000 invested that makes 10%, that's only a $2,500 increase. If you make $100,000 a year and invest 25%, that's $25,000. You just got a 100% return on your holdings.
The high savings rate makes less of a difference as you grow your holdings. For my example at around $700,000, at 10% that's $70,000 per year. I make around $110,000 on average. If my saving rate was 25%, that would be $27,500 invested. $27,500 is only around 4% of my total holdings. Just the money growing alone would outperform my earned income savings by 2.5 times.
