Uncategorized

Easy budget for hard financial times: 60:40 plan – Part 1 | Max Manimbi Jr

The purpose of this article is to help you examine ways to allocate the 90% of your income, after your tithe! Yes, I said it “After your tithe.”

I hope to lay out for you a simple budget plan that you can use to meet current needs while preparing for the future. I say “Simple” because if you can’t explain your plan in 60 Seconds, you probably don’t have a plan ha-ha! Using will power to stay on a budget doesn’t usually work. Tracking your spending doesn’t work. You need a system that will help you develop good habits.

This article is structured in this way. Under each key concept – I will expound on their importance, then give you the “Practical Application” so you can start applying. We will place a special emphasis on making your budget “Automatic” and seamless (Never trust yourself with too much cash in one account!).

  • Critical Question: How much does it cost you to keep you going? That is; to pay your school fees, power, water, clothes and so on. I propose as living on 60% of your income to meet all those needs as a good benchmark. In this plan on how to live on 60% of your income, we will divide your income “The 100%” into these potions;
  • 10% = Tithes – Don’t steal from God.
  • 10% = Short – term savings _ Feel Good account. 10% = Long term Savings _ Big Idea Account
  • 10% = Debt reduction or Short-Term Savings again! 60% = Expenses
  •   Let’s GET Radical:
  • To begin, I’d like you to set a goal to live on 60% of your income, this may seem impossible especially when most of us can’t seem to live on the 100%, but its attainable! Your major expenses comprise of your Tax, Rent, Food and Transportation. The goal would be to have all these major expenses covered by 60% of your income so you can Save, Invest and Grow your wealth!
  • Set up your bucket List!
  • No, I do not mean the list of things you want to do before you die. I’m talking about your accounts! Your accounts are buckets that capture your Take home pay. You should have at least these five (5) accounts;
  • Account No 1: Your Giving Account (10%)
  • Imagine if you ate all you can but your body had no outlet (Not pleasant eh?!). In the same manner every budget must have a giving component. “Sowing and Reaping” is a powerful law. It has worked for centuries before and still is true to this day. The riches people in the world understand this concept. In fact, the only people who don’t give are the poor! Giving is a rich man’s game.
  • While some give to charities and other non-profit causes, I believe there is far more blessing in giving to God through your local church. I am fully convinced that if you give God your 10%, he will help you manage the 90%. When you give him the 10%, he takes care of your 90%. You keep God out, you risk the whole 100%.

Let’s get practical!!

Your tithe is 10% of your Gross income. Your Gross income is your full take home pay before any deductions such as taxes. For example, Max, an Accountant earns an annual gross salary of K30,000.00. His annual tithe would be K3,000.00 (10%) or K116 each fortnight (3,000 divided by 26 fortnights). A simple check of your employment contract or payslip will help you identify your gross pay.

Make it Automatic, Make it Non-Negotiable: There are two ways in which you can make this automatic;

  1. Salary Deduction: Provide your payroll with the bank account of your local church and ask them to add that account to your salary deduction list.
  2. Set up a standing order with your bank account: Fill out a standing order form with your Bank (BSP, KINA) and ask them to deduct automatically from your main checking account your tithes, into your nominated church account.

Account No 2: Short term – Savings Account – Feel Good Account (10%) If I were to do a survey, I would safely assume that 40% of our PNG working class do not have at least

K1000 in savings available for Emergency.!! What is our way out of it? Have a system of saving!

The purpose of this account is for you to put away 10% of your fortnightly income that you intend to only use in the event of an emergency. Such as when you lose your job, or your house burns down etc. Its your feel-good account because it acts as your security. Its that account that has your back when your backs against the wall.

This account should be hard to reach and not link to your everyday account or your mortgage. Ideally you want to have six months’ worth of cover in your emergency fund. In other words, if you were to get unemployed, you have money saved that can last you six months’ worth of living expenses. Six months is enough time to lend a new job.

Let’s get practical!!

If you are self-employed, a small business operator or working for a small SME, the best option for you is to open a Voluntary Contributions account with either Nasfund (Eda Super) or Nambwan Super (Choice Super). The best thing about it is you get high interest on your savings. Nasfund and Nambawan pay the highest interest on savings much higher than banks.

For those in full time employment, you can achieve this by opening a voluntary Savings account with the competing Superfund. If you’re currently contributing to Nasfund, open your voluntary Contributions account with Nambawan. I personally contribute to Nasfund but have a voluntary savings account with Nambawan.

I strongly recommend Voluntary Savings with the super funds because they do not offer Debit cards. With a card in your hand you would be constantly tempted to spend your savings. You only withdraw this money in the event of an emergency.

Make it Automatic, Make it Non-Negotiable: There are two ways in which you can make this automatic;

1. Salary Deduction: Provide your payroll with the account of your savings partner (Nasfund or Nambawan) and advise them of the deduction amount (Which should be 10% of your take home pay).

2. Set up a standing order with your bank account: Fill out a standing order form with your Bank (BSP, KINA) and ask them to deduct automatically from your main checking account into your nominated savings account if your payroll department doesn’t do Salary Deduction.

Account No 3: Short Term Savings Account – Big Idea Account (10%)

The aim of this account is to help you save for your big plans that might take you longer to save up for. For example; Holiday, Wedding, your toddlers’ future school fees – you get the idea, anything that will cost you a lot of money. This is your big idea account because this account will help you tick some major boxes!

Now putting 10% into this account is for the purpose of going by the budget. If you are serious you can get the cost of your major goals. Then Break it up into Small fortnightly amounts that you can put away into this account. For instance, if you Want to go for a holiday in December and it would cost K5,000. Divide that by 26 fortnights. To achieve your goal, you need to put K192 away each fortnight.

Let’s get practical!!

The best account option for you to achieve this is to open a savings and loan account with any of the Savings and Loan Companies. My personal favourite is NCSL. I use my NCSL Account to help me save for major expenses. Although they offer the option for saving for specific areas (Education/Christmas) I normally just keep my contributions in General Savings.

Allocate 10% of your take home pay into your Savings and Loan account to cover off your long-term goals. Along with the flexibility of getting loans against your savings, you get paid an annual interest based on what the company makes in that year.

Make it Automatic, Make it Non-Negotiable: There are two ways in which you can make this automatic;

  1. Salary Deduction: Provide your payroll with the account of your savings partner (NCSL or TISAS etc) and advise them of the deduction amount (Which should be 10% of your take home pay).
  2. Set up a standing order with your bank account: Fill out a standing order form with your Bank (BSP, KINA) and ask them to deduct automatically from your main checking account into your nominated savings account if your payroll department doesn’t offer Salary deduction function.

Max Manimbi, Jr is an accountant with a ‘Big Four’ accounting firm. His passion is in helping people get better with their finances. You can follow him on Facebook: https://www.facebook.com/Maxie360 and on LinkedIn linkedin.com/in/max-manimbi-jr-3b1ab76a

2 comments on “Easy budget for hard financial times: 60:40 plan – Part 1 | Max Manimbi Jr

  1. Abraham Watch

    Thank you for the inspirational message and could also mean a teaching track for new Christians.
    You know the blessings according to Mal ,3
    A lot of PNG citizens need to know these.

    Like

  2. Definitely applying this

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: