The 70% Rule

America has a big problem with financial literacy.

No, I'm not in finance, banking, lending, real estate, or any other profession that gives me the right to make such a bold claim. So how dare I make it?

Despite my youthful looking photo, I'm old enough to have made plenty of my own mistakes over the years. I've also had the unfortunate opportunity to watch a number of people around me make many of those same mistakes, or worse. And to top it off, I have four kids, the oldest having graduated high school this year without learning much of anything regarding financial literacy in the public school system.

So where do kids learn about money? Usually from their parents, who learned from their parents, and so on, and so forth. But here's the problem: If your parents are not financially literate, how are they supposed to teach you to be financially literate?

With few exceptions, it has become a perpetuating cycle in our society. Instead of learning how to make money work for us, we've been trained and conditioned to believe that we can have anything we want for the low monthly payment of (insert amount here), and so, that's exactly what most people do. As long as you can afford the monthly payment, why not?

But isn't this way of thinking damaging the futures of many?

Albert Einstein said about compound interest "He who understands it, earns it ... he who doesn't ... pays it."

I wish I could say that right now, today, I was doing everything right, but I'm still fixing some past mistakes, and I'm still trying to learn to do things better. But I am trying.

And on that note, I learned something recently that I really like. It's called 'The 70% Rule".

The basic idea is that, instead of looking at your income in terms of dollar amounts, look at it in percentages. And the goal is to only spend 70% of what you bring in.

That leaves you with 30% of your income to put toward long-term goals such as savings, retirement, charitable donations/tithing, or whatever is important to you, with the 70% to go toward the "have to's" like the house, cars, utilities,, etc.

And using a percentage makes it especially easy if your income fluctuates like mine does.

I have no doubt that many of you are a lot smarter than me when it comes to financial literacy, but hopefully this idea is beneficial to someone out there. And more importantly, I hope this topic is one that we will all take more seriously in our own lives, as well as sharing with others.