Comments on: How to Divide Your Income

By: M

Sun, 20 Sep 2015 07:14:07 +0000

I wish I’d had his advice too! Especially when I was really young and still living at home with my first Saturday and part-time jobs… I can’t even imagine how much money I wasted back then

By: weenie

weenie — Sat, 19 Sep 2015 21:57:14 +0000

Funny, I’d heard of Li before (Hong Kong billionaire) but never knew of his advice re dividing your salary, which I really could have done with right when I started working full-time! Certainly, I would have benefited from his guidance which would have really helped me not get into so much debt!

At the moment, I don’t have set divisions, just 50% savings/investments (or rather, 30% while I’m paying towards my Japan holiday) and 50% (70%) on everything else.

Your plan looks good though – perhaps I should do something in respect of charitable donations.

By: M

Sat, 19 Sep 2015 10:50:54 +0000

Hi Fibrarian, thanks for stopping by.

I agree that Li’s advice is excellent for people who are just starting out. 25% is way higher than what most people from the general population (UK/USA) manage, so should actually help them a lot if they can stick with it.

In terms of our own savings proportion, we currently are saving around 28-31% of our net income per month. This doesn’t include pre-tax pension contributions though. Li’s advice to save is first intended to be put towards a small business – that is his recipe for success towards wealth (and FI presumably). He advocated small retail/wholesale operations as an easy way to get started in making your own money – he said that you wouldn’t lose much if it did fail, but the point of the other divisions is that you would be developing yourself and your network at the same time. Thus, that would also contribute to your new business venture and hopefully ensure success, or least raise your game somewhat.

So the investment percentage he recommends should also really be considered along with the ‘relationship building’ percentage, as well as the ‘education’ percentage – because theoretically if you’re more educated or have paid for training courses that give you more skills and experience, they will also contribute towards your wealth.

Maybe then the figure should really be 60% with all these added together – just that the 60% is apportioned into various types of investment, not just savings/other ‘regular’ investments.

Cheers

By: FIbrarian

FIbrarian — Sat, 19 Sep 2015 10:34:17 +0000

Hi M and thanks for the link

I think Li’s advice is great for the vast majority of people. It has a clear focus on self improvement and also on saving. For most people the 25% he quoted for saving/investments is a great start and far more than the national average however I don’t think it’s quite enough for a realistic FIRE.

I see you’ve gone for a figure of 20% in your own model. I’m assuming this doesn’t include pension provision or other fancy secret saving techniques else it seems a bit on the low side?