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Women & Money: Why your savings account is not growing

A lot of young women tell me that they’ve been working for ___ number of years, but still barely have any savings.

That was also my status for many years, always depleting my bank account, unaware that I didn't have any rainy day funds -- until I changed my money mindset in the beginning of 2015.

What I was doing wrong
(and probably what you're doing wrong, too)

The way I was doing it was: I get my paycheck, I spend it on stuff, then whatever is left at the end of the month — are savings.

My formula was:
Income - Necessary Expenses - Extra Expenses = Savings.

But then my friend changed my life by introducing me to this budgeting software called YNAB: You Need A Budget.

It totally rocked my world, and I got hooked, and found myself achieving all my financial goals in a matter of weeks -- WITHOUT feeling like I was putting myself on a leash and depriving myself of spending.

It taught me to switch up my formula to:
Income - Necessary Expenses - Savings = Extra Expenses.

See the change? Now, I know it seems like such a trivial tweak, but it made a world of a difference. If you want to check that budgeting program out, you can get it from THIS LINK to get 10% off.


Rich Bitch:
Another way to look at your savings

However, if you’re not yet ready for the big guns — I also discovered a book called “Rich Bitch”, written by finance expert Nicole Lapin.

Her work is all about helping women take control of their finances and learn the language of money. I really liked how she simplified the way you can approach budgeting.

She recommends that you divide your cash flow (your income) into 3 E’s: Essentials, Endgame, and Extras.

 Image via RueLala.com

Image via RueLala.com


The Essentials: 70% of your cash flow

The title is self-explanatory — the items that go in this bucket are all your essential expenses. This is where you ask: Do I really NEED this? This chunk usually includes:

  • Food (groceries, meals)
  • House (rent, dues, mortgage, etc.)
  • Utilities (electricity, phone, internet, etc.)
  • Transportation (or car maintenance)
  • Insurance

The Endgame: 15% of your cash flow

This is the Long-Term Bucket. This is all about your future goals, big goals that you’re saving up for little by little, month by month.

Now this can mean big things (retirement fund, a house), or it can be smaller things — for example, my laptop is 3 years old, and I predict that I will need to replace it in 2 years. So in my Endgame bucket, I have a sub-bucket for a New Laptop Fund.

This category is dependent on a person’s priorities (except for your rainy day funds), but it can include:

  • Rainy day funds (minimum level = can help you live 3 months without any income)
  • Retirement fund
  • Saving up for a big Europe backpacking trip 2 years from now
  • Saving up for grad school
  • Saving up for quitting your job & starting your own business!
  • Saving up for your own house

The Extras: 15% of your cash flow

And of course, you have to have a bucket set aside for the not-necessary-but-totally-fun stuff. This includes stuff like:

  • Buying that cute bag you “need” to update your closet
  • Making a trip to the H&M Home section to get something nice for your bedside table
  • Buying more markers & Post-It’s (that’s me)
  • I'm sure you can think of many other things


Here's a recap

So, you get 100% of your cash flow, and you divide it into 3 E’s:

  1. Essentials = 70%
  2. Endgame = 15%
  3. Extras = 15%
Keep in mind that these percentages are just recommendations, but I think that the most important lesson here is to put your ENDGAME before your EXTRAS.

Think of it as a chain of descending buckets with water (money):

  • Extra-Large Bucket 1 (Cash Flow) tips into:
  • Large Bucket 2 (Essentials) beneath it, then
  • the water overflow goes into the next one, Medium Bucket 3 (Endgame),
  • and whatever water is left flows into Small Bucket 4 (Extras).

The order & size of buckets are extremely essential. Keep Endgame & Extras at the same size, or keep Extras smaller. Makes sense?

Now, I want you to go and draw up your budget, decide on your percentages, and more importantly, focus on your endgame.

I know that budgeting and saving money is not very fun, but remember:
Being broke, and not being able to do what you want because you’re broke — sucks waaaaaay more.


If you'd like a more guided step-by-step process, and a FREE worksheet on how to effectively budget your money (and maybe even start earning extra income), drop me your e-mail below!

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