The Money Show’s Bruce Whitfield asked Warren Ingram, a financial advisor at Galileo Capital, how to divvy up his monthly income so that he can enjoy life, save for the future and not worry about money every month.
Ingram suggests following the “50/15/5 rule”, developed by Fidelity in the USA.
It’s great for those who don’t like to budget every month.
15: Save 15% of your pre-tax salary for retirement
Invest the 15% in a company pension plan or your own retirement annuity (RA).
If you are not saving this amount now; then arrange an annual increase in your savings.
For example, apply to increase your RA contribution by 10% next year.
5: Save 5% of take-home pay for short term savings
You should have an emergency fund that can cover three to six months’ expenses.
Ingram warns that this fund should only be for when disaster strikes, not unplanned expenses that are necessary but not an emergency (e.g. replacing a car tyre, fixing your smartphone screen, extra medical costs, maintenance of your car, etc.)
50: Spend 50% of take-home pay on essential expenses