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Piggy-Banking for Adults

Mar 11, 2020 2 min Read

Key Takeaways

  • Give yourself 50/20/30 reasons to save.
  • Emergencies only: It's not called drastic plastic for nothing.
  • Most millionaires' homes shout "thousandaire!"

 

When we were kids, we used to drop nickels into our piggybanks with a happy twinkle in our eye. But somewhere along the way, some of us somehow lost the thrill of saving up.

 

 

If that sounds like you, then don’t worry. We’re here to help.

Here’s why (and how) you should consider reclaiming your drive to balance your budget with a little twist that makes colleagues green with envy: the secret of spending money to save money.

 

1. Revisit the 50/20/30 rule

Are you familiar with this simple way to create a balanced budget? Divide expenses into 3 buckets to quickly determine the affordability of new items:

  • Fixed expenses (50%): Everything you’re required to pay each month (including rent, mortgage, utilities and credit card bills) should be less than half of your household income.
  • Goal-setting (20%): This includes goals you’re working towards and can be short-term, mid-term or longer-term where priorities like your 401(k) fall.
  • Variable expenses (30%): This bucket includes any inconsistent purchases from food expenditures to funding kids’ summer camps.

 

2. Redefine emergencies

Grandpa was right: Credit cards should only be used for emergencies and building a credit file. If the money isn’t in the bank, you most likely don’t need that pair of shoes or island getaway yet.

Most of us started using cards with good intentions of paying off balances in full each month, but consumerism takes hold when we compare our lifestyle with neighbors, co-workers and friends. It’s no surprise that credit card debt is at the highest level it’s been in five years, with the average household balance topping $7,000.1 Take the time to earmark an emergency card in some way to avoid impulse buys, perhaps personalizing it with your child’s picture to help you think twice before you swipe.

 

 

3. Get creative with saving

An efficient path to achieving life goals of sleep, low stress and happiness: living within (or preferably below) your means. A case study of millionaires1 revealed that 66% live in homes valued at less than $300,000.

For example, you can save on clothing purchases by giving your wardrobe a facelift and embracing the idea that you may not need more clothes if you get creative with what you already have. Try a self-imposed moratorium on new clothing purchases for 90 days. While the first few weeks and advertised sales coming into our inbox — might be tough, you’ll be surprised at how easy it gets when you learn to prioritize creativity over more stuff.

 

What you can do next

Consider following some simple rules (and get creative) to help put your budget — and your life — in balance.

If you secure tomorrow, you can enjoy today.

Help make sure your loved ones are protected if something happens to you, with Prudential Life Insurance.

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