How to Manage Your Money by Jim Rohn

October 4, 2012

Jim Rohn is my favorite business philosopher & motivational speaker. He has a simple formula on what you should do with your money to ensure success in your personal finances.

The 70-10-10-10 Formula:

70% – Learn to live on 70% of what you make. Housing, food, car, clothes, gadgets, internet, etc.

10% – Goes to passive investing. This is where someone else uses your money to make more money for you – stocks, mutual funds, etc. If you don’t have the time or education in stocks, you can’t go wrong investing in a low cost, no load index fund like Vanguard.

10% – Another 10% goes to active investing. Money goes to start your own business or you can keep it aside for a rainy day fund.

10% – Goes to charity. Whether you believe in this or not, Jim Rohn (and many other wildly successful people) strongly believe that you have to send money out in order to get more. Just give that money away & know that the universe will provide more for you. Give it away to your church, food shelter, animal welfare, kids, tip well to waiters, etc.

This also has an effect on our mind where we force ourself to live on just 90% of our income – and we can create an abundance mentality by knowing that even if we give away 10% of our money, we’ll be fine.

Of course, you’ve probably heard that Warren Buffett, Bill Gates & a bunch of other billionaires are giving away almost all of their wealth back to society. Andrew Carnegie, the steel magnate & one of the richest men in the world, also gave away all his money. He is the reason we have public libraries!

Use Auto Debits:

Spending all your money & investing what’s left over is a big mistake.

Pay yourself first.

Set up auto debits so that the 10% automatically gets withdrawn from your bank account & goes to your savings & investment accounts.

Final Thoughts:

All of this is assuming you are debt free (credit card, loans, etc – does not include mortgage). If you have credit card debt, pay that off asap.

Don’t have enough money to follow 70/10/10/10?

You can adjust it to 97-1-1-1 (or whatever else that works for you).

Spend 97%. 1% on active & passive investing. Final 1% on charity.

It doesn’t matter which formula you’re using. Following a consistent formula to set the right investing mindset habits is what matters.

Bonus: Formula for Success & Failure