Being that this is the very first post for this site, I thought I’d start off with a simple money allocation tip that I heard from Jim Rohn in one of his seminar’s that I downloaded. For those of you who are familiar with Mr. Rohn, you know that he is one of the premier business philosophers still living and he has a wealth of advice that is published in both text and audio formats. The particular seminar that I am referring to, entitled Financial Independence, has a simple piece of information that, I believe, can be very valuable to ones financial advancement. Here is was he suggests:
-70% of your income goes towards all of your expenses
-10% goes towards ‘passive capital’
-10% goes towards ‘active capital’
-10% is set aside for tithing
These numbers may seem a bit daunting at first glance but, if necessary, you can start out with numbers like 97%, 1%, 1%, 1% if that’s all that your current financial situation allows for. If this is your starting point, just work on incrementally driving the 97% figure down and driving the other percentages up.
Some of you may be asking what Mr. Rohn means by passive capital and active capital. Here are definitions of the two as I understand them:
Passive Capital – Essentially, you hand your money over to someone else and you allow them (meaning the brokerage firm or whoever it is) to play the active role in helping you make a profit. An example of this would be investing in mutual funds.
Active Capital – You are the one playing the active role in making a profit. A couple examples of this are investing in real estate and buying and selling goods.
As I said before, if this method seems like it would fit well into your financial plans, modify the percentages a bit and come up with some numbers that make sense for you. Who knows, maybe someday you’ll get to 1%, 33%, 33%, 33%.