10/20/70 INCOME MANAGEMENT PLAN An effective method for managing income plays a vital role in a financial plan. The 10/20/70 Income Management Plan shows how to allocate income to:
Here's how it works: Divide net income into three groups:
Put-and-Spend Fund: This covers normal living expenses, such as food, insurance costs, mortgage payments, etc. This money can be kept in a regular checking account. Put-and-Take Fund: This is to gradually pay off accumulated debt, if any. Meanwhile, do not get into any more short-term debt. Use the 20% fund for unusual, emergency or special expenses, such as purchasing of furniture, to finance a vacation, or to pay an unusually large medical or dental bill. This money can be kept in an account such as a money market fund, which offers liquidity but earns a high current interest rate. If there are any extra funds accumulated beyond these needs then they can be allocated to the... Put-and-Keep Fund: This is for long-term investments, and is not to be spent. This 10/20/70 Plan must be followed conscientiously and consistently to be effective. For a sample questionnaire and outline allowing you to perform this calculation using your own personal financial data, proceed to Download Central and retrieve our worksheet. Additional debt management web sites - http://www.annualcreditreport.com http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm |
