(And no – this is not an April Fool’s joke… though now I wish I would have come up with something more fun to trick you all on :))
As I was going through some rabbit holes online yesterday, I came across this gem by the one and only Angelina Jolie and my
pants jaw just about dropped to the floor.
“Save one-third, live on one-third, and give away one-third.” – Angelina Jolie
Wow! What a budgeting strategy! Once again proving just how sexy budgets truly are… After all, if Angelina Jolie is sexy and she budgets, then ipso facto budgets must too must = sexy! BOOM!
We can all go home ladies and gentleman :)
But let’s not, yet… let’s talk about what this actually looks like in real life and if we can ever pull it off ourselves!
I tried to research this quote further to see if she really DOES budget like this or if it was just an off-handed comment, and while I didn’t get a straight answer anywhere (the quote itself derived from an interview she did with CNN in 2005 when asked what she does with the money she makes each year), I did find this particular line enjoyable from an interview a year later w/ Anderson Cooper:
When CNN’s Anderson Cooper marveled that she gives away a third of her earnings, Ms. Jolie laughed. “Yes, well, I have a stupid income for what I do for a living,” she said.
Haha… At least she knows what’s up :)
But whether she actually manages her money like this or not, it doesn’t matter for today’s purposes as the concept itself is well worthy of some paying attention to. Let’s break it down, shall we…
I. Living on one-third of your income
If you can pull this off, you’re essentially left with TWO-THIRDS of your income leftover to do whatever it is you please!! Save it, invest it, give it all away, work less – you are completely empowered and have about a billion options at your disposal.
This is the key to everything financial – having more money coming in than you’re spending.
Paying your bills on time and having enough to get by is fine if you want an average life, but if you’re looking for something MORE – something that you can hold onto and really build on over time – then “average” isn’t going to cut it. You’ve got to challenge everything and find where you’re leaking money and how you can expand that gap even more. Something that can benefit anyone, movie star or not.
II. Saving one-third of your income
I’m not sure if Angelina mentioned this part first on purpose or not, but I’m going to assume that she did because she believes it’s all about *paying yourself first* and then living on/spending the rest.
And I wouldn’t hate her for that :)
If you can divert a chunk of your money the second you get a paycheck before it all goes out, you wouldn’t have to worry anymore whether you’re doing “the right thing” as it’s already taken care of. And the actual act of doing this is super easy these days simply by automating deposits through your HR dept or by setting them up through banking/investing institutions. You’ll have to be able to live off the rest of the money of course, but technically it’s one of the easiest things to set up. And you can start with as little as 1% or even $1 dollar too if you can’t quite get to 33% yet. Honestly, these days I’m not even saving 33% – as evidence of the latest cash flow dilemmas going on… We all go through phases.
III. Giving away one-third of your income
I can’t even imagine what this would feel like – especially at Angelina Jolie levels – but it’s quite obvious that if you can do this month in and month out, you would score so much karma and play such an amazing role in giving back to the community. Something I struggle with myself, as you know, but feel incredible doing every time I’m actually able to pull it off. And just like saving or investing, you can again start with micro amounts and slowly move them up from there.
In fact, while I currently work to create a brand new philanthropy project myself in the near future, I’ve decided to pick at least one place a month to give a little money to to get the ball rolling. Sometimes I’m able to give a few hundred, and others only $20 or $50, but no matter how big or seemingly small it is, I know that every single dollar in the end can make a world of difference. Just like our beautiful starfish in that popular allegory.
Actually, here – let’s post it! We’ll be two for three this week in parables :)
A man was walking along a deserted beach at sunset.
As he walked, he could see a young boy in the distance and noticed that the boy kept bending down, picking something up and throwing it into the water.
Time and again he kept hurling things into the ocean.
As the man approached closer, he was able to see that the boy was picking up starfish that had been washed up on the beach and, one at a time, he was throwing them back into the water.
The man asked the boy what he was doing and he replied,”I am throwing these washed up starfish back into the ocean, or else they will eventually die.”
“But”, said the man, “You can’t possibly save them all, there are thousands on this beach, and this must be happening on hundreds of beaches along the coast. You can’t possibly make a difference.”
Without pause, the boy reaches down, picks up a starfish, and throws it into the ocean. As it hits the water, he says, “I made a difference for that one!”
Goosebumps every time…
If you missed Monday parable, you can read that one here: The Mexican Fisherman.
Point is – a few dollars can make a huge difference. Whether in saving, investing, paying off debt – or in this case – trying to make the world a better place.
So am I crushing on Mrs. Jolie’s budgeting skills over there? You bet your sweet a$$ I am. Sure she makes a killing and is blessed more than many of us in the looks/abilities/charisma department, but we can all strive to manage our money in a similar manner or even better. It’s popular to try and hit the 50% savings levels these days – at least here in the personal finance world – but really any of these goals would be incredible to go after. It’s just a matter of figuring out the best path for each of *us*.
Other budgeting strategies…
Here are a handful of other budgeting strategies floating around out there too – perhaps some of these are more do-able/exciting to you?
- The 50/20/30 Guideline — 50% towards fixed costs, 20% to financial goals (saving/investing/debt payoff), 30% to all other flexible spending (wants, likes, charity, blow money). This is one of the most popular methods out there.
- The 60/10/10/10/10 Guideline — 60% towards expenses, 10% to retirement, 10% to long-term savings, 10% to short-term savings, 10% fun money.
- The 35/15/10/15/25 Guideline — 35% for housing, 15% for transportation, 10% for saving, 15% for debt, 25% for life.
- The “Max Out Your Retirement Accounts and Do Whatever You Want With The Rest” Method – one that I’ve been following in recent years :)
And then the whopper of them all, per Dave Ramsey’s The Total Money Makeover:
- Charity: 10-15%
- Savings: 5-10%
- Housing: 25-35%
- Utilities: 5-10%
- Food: 5-15%
- Transportation: 10-15%
- Clothing: 2-7%
- Medical/Health: 5-10%
- Personal: 5-10%
- Recreation: 5-10%
- Debts: 5-10%
As you can see (and probably know by now) budgeting can be as simple or complicated as you want to make it. And there’s no shortage of ideas out there.
Try one out, tweak another, and once you find one that really starts sticking – for the love of God RUN WITH IT AND NEVER LOOK BACK! Haha… You’re liable to drive yourself crazy with this stuff, but you have to go through the process until you figure it all out and find yourself in the Promise Land :) Start from the bottom tracking *everything*, then work your way up from there.
If you’ve already gotten a good rhythm down and need a way to start tracking it all, check out our database of budgeting spreadsheets here, or try services such as Mint.com, YouNeedaBudget.com or even PersonalCapital.com. You match both sides to the equation up and you’ll be high rollin’, baby!
Now tell me, what April Fools tricks have you fallen for today? :) If none, tell us about the way YOU budget instead and hook your neighbors up!
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!