How The Prosperity Formula Can Greatly Improve Your Personal Finances (And Everything Else) This Year3 min read
The 70:20:10 ratio, or the Prosperity Formula, was initially made as a model for learning and development. However, this ratio has evolved into a savings model used by financial advisors as a means of allocating your expenses properly. Not only that, but for people who like to organize things through numbers, you can be creative in applying this rule or formula in your life. Here are some ways you can use it to gain advantage in your finances, and other important aspects of your life.
The 70:20:10 ratio is aptly called The Prosperity Formula in its ability to effectively break down your budget and enables you to provide for your future prosperity. This tried-and-tested formula in allocating your money is only as effective when followed with discipline and commitment. A lot of successful people and financial advisors live by this rule because they constantly follow the percentages allocated for each of their expenses.
Following your monthly paycheck, you can apply the Prosperity Formula through the following:
70% goes to allocated or “fixed” living expenses like rent, food, water and electric bills.
20% goes to your savings. You can also break it down to: 5% retirement, 5% for emergency fund, and 10% for investment savings. This depends on your priorities when it comes to savings. For example, if you have three separate bank accounts, then you can divide your savings to e.g. 5% Retirement, 10% Investment, and 5% Emergency Fund.
10% goes to debt repayment, car payment, leisure, or tithes. Again, you can simply break it down to smaller percentages depending on which ones are more important to you.
Learning and Development at Work
You can apply the 70:20:10 model for learning and development on your work and career advancement. The rationale behind this model is that employees learn most through their challenging day-to-day tasks than through training or mentoring.
70% goes to your everyday tasks, when you take on challenging projects, learn from your mistakes, and solve problems on your own. By simply doing your day-to-day tasks and making a conscious effort to learn from them all, you continue to get better at what you’re doing. Motivation and personal assessment are the major catalysts for learning, and you can get most of that by simply doing and learning from your everyday work experiences.
20% goes to social exposure. You learn and develop through your peers or boss through coaching, collaborative efforts, encouragement and feedback.
10% goes to learning and developing your skills through courses, reading and training programs that the company provides you. All these training’s will not be fruitful if you’re not willing to apply them with your work, which ultimately leads you back to the core 70% that makes up your learning.
Networking is very important as you advance with your career. You get to meet people and connections that will help you on your way to success.
70% goes to getting to know people who work within your direct field of interest or something that you’re passionate about. For instance, if you’re into writing, ask your connections on how they started, and the challenges they encountered along the way. You can also get to know the people they look up to, and their influences, so you’ll have an idea on how they operate. This way you can emulate their work ethics and background, and apply them on your own experiences.
20% goes to getting to know people in areas related to your field of interest. For example, if you want to be an online writer, you’ll want to get to know SEO specialists who can give you insights on how to boost your website and get more followers. See the potential in how other people can support your endeavors or passion.
10% goes to getting to know people that simply interest or inspire you. The fact that they’re not working on your field of interest or core expertise is even better because you’ll get to learn something new from them and see things in a totally different perspective. Whatever field they may be in, their passion can also fuel yours. Ask them about their work, and find a way to merge what you learned from them to your own strengths or interests.
Be creative in using the 70:20:10 ratio in your life. It all boils down to organizing things in a way that you clearly see the hierarchy of most important to least important factors in your life.