The Main Purpose of Living on 80%: to Give/Save the First 20%

If you remember a couple of weeks ago, the 6th lesson I learned from Stan was that to have a proper budget, I had to live on 80% of my net income.  While that serves as the function of the budgeting process, it is not the purpose.  The purpose comes in Lesson 7, which goes like this:  When I keep my expenses within 80% of my net income, there is 20% extra built in for giving and saving every month.  Notice that I said “extra”.  I did not say “left over”.  For us to be motivated to live within the 80%, there has to be a passion for what is being done with the 20%.  The 20% becomes the first line item of the budget every month.  I know before I spend the first penny that I’ve created an expense model that gives me the flexibility to prioritize what is most important.

When we realize that true meaning in life comes from what we give away, motivation will follow to execute a budget that allows this.  Who are you passionate about helping?  What do you want your legacy to be?  When those things start to become our driving force, executing a daily budget becomes easy.  Action will follow passion.  Think about any successful team you have been on.  The desire to experience victory is the driving force behind all the hours of practicing.  It’s no different with your money.  When you become passionate about making a difference with your resources, your daily actions and the decisions you make with your money will start to line up.

And while generosity is the overriding passion, savings is what will allow this lifestyle to be permanent.  Having adequate savings is what will allow someone to not only handle unexpected needs for immediate cash, it will also prevent the need for future borrowing for purchases that need to be made in cash versus taking out a loan (clothes, cars, furniture, home improvements, education for children, weddings, just to mention a few).  Having adequate savings is what allows us the freedom to give generously, knowing that our needs will be met.

So the two go hand in hand.  Passionate generosity serves as the driving force.  Savings allows the generosity to become a lifestyle.  And focusing on these things allow the execution of a disciplined budget, which permits them to happen.