In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.
- 10% you save right away from each paycheck. The point in this is to have extra money that is yours outright.
- 20% you divide between all your creditors. You would take out a piece of paper and write all your creditors in it and divide the 20% to all of them, pro rated. Just as an example, if you owe $250 to Creditor A and $500 to Creditor B you may make $375 which means 20% is $75. You would pay Creditor A $25 and pay Creditor B $50.
- 70% is to be used on your living expenses. All your bills are to come out of here. You cannot dip into the 10% or 20%. For some people this will be hard, especially if your making minimum wage. Yet it also means you have room to spare once you’ve trimmed your bills down to this level.
The part that I find interesting that other Personal Finance Blogs talks about is saving at least 10% for retirement. While in this book they said to save 10% to invest safely. To cover this problem, I believe once your debts are paid off you should put the 20% towards retirement, that way you have money in the bank and/or investments, no debt, and your bills are getting paid.