how can you afford this?

One of the first questions people have asked is how we can afford to leave our jobs and travel. Our savings plan is quite simple. I got it from attending a seminar called, The millionaire mind intensive wealth seminar.  It is based on a book that Jon read named, "Secrets of the millionaire mind." If you have ever heard of the seminar you might think I'm crazy. The truth is that I was a bit skeptical when Jon invited me but he had free tickets so I thought why not. Regardless of your opinion of the seminar and all the wacky things they make you do, I learned a really valuable tool that has helped me structure my spending and savings. I don't remember what they call the savings plan but in a nutshell here's what I took away.

Below is the percentage that goes into an account based on your monthly paycheck: 

• 40% - necessity account (rent, car payment, groceries, toiletries)
• 10% - play account (the idea is that you spend that money every month on something for yourself)
• 10% - education account (swim lessons, tap dancing lessons)
• 10% - charity account (giving money to a charity that you believe in)
• 15% - financial freedom account - FFA (for investing)
• 15% - long term savings & spending account - LTSS (buying a house)

It is based on the fact that only 40% of your salary should be going toward necessities.  But you can also change the percentage to fit your need. I wasn't always the strictest with the plan but did follow it every month. I like that it's based on percentage rather than a dollar amount. For example, I wanted to pay off my student loan so I created another account and only put 5% in play, education and charity.  

Here's what I did after the seminar. I already had my Citibank checking account which I named my necessity account and created three more savings accounts at Citibank (play, education, charity).  You can nickname each of the accounts so I literally have an account called play. Then I signed for three ING Orange Savings account (named them FFA, LTSS, and student loan).  In the end I had seven accounts and you might think this is a little too much to manage but it really isn't once you have the system down. Every pay period I had an automatic percentage withdrawal go into each of the ING accounts because that was where my real savings was going to add up. Then I would transfer money from my necessity account to the other three Citibank savings account. Sometimes I didn't transfer money to my education account because I had unexpected expenses. Remember it's only as strict as you want or need it to be.  

This savings plan has allowed me to pay off my student loan, take swimming lessons, go to Seattle/Vancouver, give over $1K to charities, and save for our trip.

Comments

[Meghan Q]

Then sign up for mint.com which amalgamates all the information on ALL of your acccounts (all credit cards, 401ks, savings, checking, etc) so that you don't need to open 43 different websites. It also tracks all spending by category.