Step 1: Spend No More Than 75% of What You Earn

For every dollar you make, only 75 cents should go toward your lifestyle and expenses. That includes:

• Rent or mortgage

• Food and groceries

• Transportation

• Vacations

• Even that $5 iced coffee or new gadget
  

Why 75%?

• It gives you flexibility without restricting enjoyment.

• It trains you to prioritize value over price.

• It helps you develop frugal habits — something even millionaires practice.

In fact, the wealthiest people often look for deals, ask for happy hour menus, and even split bills down to the last cent — not because they have to, but because they understand how to protect their wealth.

And here’s a truth bomb: big-ticket purchases (like fancy cars or 100-inch TVs) often bring only short-term happiness. After the honeymoon phase, they become just another thing.

Step 2: Save 10% For a Cushion Fund

This 10% is your safety net — not for travel, dining, or impulse cravings, but for real emergencies:

• Medical issues

• Car accidents

• Sudden job loss

• Unexpected repairs

How Much Should Be in Your Cushion Fund?

• Add up your monthly expenses

• Multiply that by 5 months

For example, if you spend $2,000 a month, your cushion fund should be $10,000.

Once you hit your cushion goal, stop saving in that category and move on to investing.

Also, keep this fund in a high-yield savings account (HYSA) instead of a traditional one — your money grows much faster with interest rates up to 4% APY compared to 0.5% from traditional banks.

Step 3: Invest 15% to Build Wealth

The final 15% should go toward investments. Why? Because:

“Real wealth isn’t built from labor — it’s built from owning assets.”

This mindset shift is what separates people who just make money from those who grow it.

Start With These Two Accounts:

1. Roth IRA

   • Contributions are made with after-tax income

   • Earnings grow tax-free

   • 2024 limit: $7,000 (or $8,000 if over 50)

2. 401(k)

   • Offered through employers

   • Contributions made pre-tax

   • 2024 limit: $23,000

   • Often includes employer matching (aka free money)

💡 Pro Tip: Don’t just transfer money into these accounts — you need to invest it within the account.

What to Invest In?

The simplest and most effective option: Index Funds or ETFs.

Why Index Funds?

• Diversification (spread across 500+ companies)

• Lower risk

• Long-term returns of 8–10% annually

• Set it and forget it approach

Examples:

• VOO – S&P 500 Index

• FXAIX – Fidelity’s S&P 500 Index Fund

Final Thoughts

This 75/10/15 rule might seem simple — because it is. But when applied consistently, it creates the foundation for long-term financial freedom.

TL;DR Recap:

• ✅ Spend no more than 75%

• ✅ Save 10% in a cushion fund

• ✅ Invest 15% to build assets

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