How long does it take to change, and turn around your finances?
For Abe, it takes just two years, and today he’ll share with you the three reasons why he was able to achieve it.
Let’s read his story below.
Two years ago, a friend in church approached me and asked me about saving for my retirement. Yes retirement and it sounds awkward and weird to me back then.
Imagine asking a young engineer, who’s just been working for less than three months, about retirement. I mean, I’ve just started working and I am still enjoying the fruits of my labor. Can i enjoy it first while I’m still starting?
If you share the same reaction as mine. Then let me share to you how this question changed my financial state.
That question made me curious, I was seeking answers, and assessing myself how I will really prepare for my retirement. The only thing I know that time was to save money, so and I started there.
Upon searching Google, I stumbled upon the 10-20-70 principle, which says that 10% of my income should go to charity (tithes), 20% of my income should go to savings, and budget the remaining 70% for my expenses.
When I learned the 10-20-70 principle, I tried to discipline myself to stick to this idea, and apply it – to prioritize savings and budget what’s left for expenses.
Unfortunately this budget didn’t work out for me because 70% of the budget wasn’t enough for our expenses at home (I’m supporting my Mom and Lola). So that time, I could only set aside 10% for my savings, and allot 80% for our expenses.
Having this in mind I am very thankful to that friend in church for asking me about my retirement because that question led me from inconsistency to consistency in managing my finances.
Though I was saving small that time it was a beginning of something better.
Making the habit
After several months of saving, I became a regular employee in the company, and I received an increase in my salary plus daily living allowances.
I was really happy because this time i can now follow the 10-20-70 rule.
I didn’t change my lifestyle so my expenses were still the same. But because of that raise, I have increased my tithes and my savings as well.
Every paycheck, I disciplined myself to automatically save money and make it a habit. Since the company started to give me daily allowances, that’s the time I also started raising my emergency fund (I learned about this from a Pastor).
I changed my budget to 10% tithes, 10% savings, 20% emergency fund, and 60% expenses.
Focusing on short-term goals
After a year, I got promoted and had a significant increase. Again, I was really happy because I have increased my tithe and savings for the 2nd time.
Having a bigger income doesn’t mean I need to have a lifestyle change, so I continued to live a simple and frugal life.
That time I was focused in completing my emergency fund, it has accumulated to 2 months of our expenses already and my target was only 3 months of expenses. I believe that I was right on track.
First time working abroad
Last year, I was assigned abroad for 3 months, and that’s my first time to handle big amounts of money. At first I was overwhelmed but I know I was prepared for it.
I have completed my 3 months worth of emergency fund so I added another 3 months to it to have 6 months. I have used the remaining money to renovate a part of our old house.
Having these short-term goals helped me a lot in managing my finances, and it was worth my spending.
I am in the Philippines and back to my regular income. I’m still living the same simple and frugal life, and I am content and happy about it.
I know I can spend on luxuries but I don’t prefer to do it yet. There are still goals that I need to accomplish and that is my priority.
Contentment is a choice and everyone has it, some people just lack the courage to choose it.
My financial state right now is better than before, I have 6 months worth of expenses as emergency fund, I have no debts, and most of my money is invested.
My budget for every paycheck now is 10% tithes, 50% savings, and 40% expenses.
In a span of 2 years, my financial status has changed for the better and it was because of having the right foundations and discipline in applying it.
The 3 Main Reasons Why My Finances Changed
Hunger for Knowledge
When my friend asked me about my retirement, I had no idea how to answer before, which led me to curiosity and eventually made me hungry for knowledge.
I attended seminars, read books and tried to apply it one step at a time.
In the same way, I believe that every one of us can change our financial state if we are hungry enough to be financially literate. Truly investing in knowledge has the best gains.
Disciplined as Rock
Knowing personal finance is one thing but applying it is another. It takes a lot of discipline and a change in mindset before you will get used to it.
It may be hard at first but we don’t have to make giant leaps. Baby steps will make the habit in us and these little acts of change will eventually lead us to financial freedom.
God is our provider, always be faithful on what you have
I believe that God is the one who gives us the ability to produce wealth. And by that I know that I have security in him.
We might have a small income today but if you are faithful with it, I know that it will eventually grow. As we become more knowledgeable of Him and in our personal finance, the more it opens opportunities for us to grow as good stewards.
Just continue to invest in knowledge and be disciplined enough to follow it.
With an ounce of faith, room for knowledge, and discipline in applying it, I believe that we can prepare ourselves to retire comfortable after 20 or 30 years and become a channel of blessing to people.
I am an engineer by profession, a reader, a writer by passion, a follower of Christ, and a son to my parents. I write about personal finance in my blog, The Frugal Worker, in this simple way I know that I can be a blessing by sharing the lessons and personal experiences I’ve learned and will be learning to help in educating young professionals like me in their financial lives.
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