How do you allocate your income?

Every one of us is a consumer. We literally spend money every day, guaranteed! be it eating and drinking, enjoying the cable tv and internet at home, handphone, driving your car or taking public transport, enjoying your lovely home, kid's education, etc. All these are expenses that have to be paid with your income. So you have to make sure that your income is more than your expenses. How many of you really do budgeting every month?

Some people have asked me, what is the best way to allocate your income?

To me, there is no simple way to allocate your income to the different expense categories. Because different people have different priorities and some people are just savers type and some people are spenders type.

As your income grows, a fixed percentage allocation may not make sense anymore for some category. For example, if I allocate 20% for food expenses, when my monthly income is $5,000, I will spend $1,000 on food. But if my monthly income is $50,000, that means I will spend $10,000 on food. Don't you think it is unnecessary? You will not eat that much normally, unless you go to a high class restaurant every day.

So how do I plan for myself? Here are the 2 categories and percentage of allocation that I am concern with, they are:

1. Giving (charity, help others in need, church, etc) = 10%.
2. Cash saving, insurance and long term investment = 25%.

The other 65% allocation will goes to the rest, which might be housing, food, services, leisure, transportation, allowances, credit card, etc. If there is money left, that's good, just put more on the savings. These are just my allocations preference. Yours can be different, it is okay.

If you are having some financial difficulty, it just means you might have overstretched your budget somewhere that might be not necessary. Look again.

If you want to achieve financial freedom and live comfortably now and in the future, just try re-arrange some of your priorities. Look at your income, expenses and the allocations. Does it match?

It does not matter what income you have now, you must make sure that you protect your money first and grow your money to achieve financial freedom.

Cheers! Have a great day.