What then is the object of a savings plan. The answer falls into two areas depending on the type of career you’ve chosen over your working life. Either way the object is the same, to feel secure and have a satisfactory income to move comfortably into retirement. What we define as ‘satisfactory’ can be broken down into two lifestyles and the financial groundwork required in both scenarios:

• Those with insufficient savings and who will rely on a government or aged pension to ensure both healthcare, food and shelter are provided and that they do not fall into poverty. The prerequisite here being that either you own your home free of debt or there is available social housing in your region to provide your needs.
• Those with sufficient savings and income to maintain their pre-retirement living standards, health and way of life without government support.

I began working on my savings plan about 10 years out from actual retirement, this gave me the head-start I needed to be successfully ready and able to stop work. Adequate financial groundwork often requires time and the sooner we begin to plan the better. So it’s very important to measure the time it takes to get to the finishing line. We need the right amount of time to get our finances in order so we can successfully enter retirement.. For me it was understanding the :  ⅓ rule (rule of thirds) that got me there:

What the rule of third means

This means splitting every dollar you earn three ways, each time, every time and with no exceptions. So the rule applies to: $1, $100, $1000, $100,000 etc….equally. For example $100,000 would translate below as Bills: $33,300 – Entertainment: $33,300, Wealth creation: $33,300. 

Remember we’re saving for the day we retire, so unless you have a rich family or a trust fund coming along then our options can be very limited. I had no magic bullet so let’s take a look at how I did it.

1st Third – Pay the bills:  33% – this is the percentage of your income you allocate to paying the bills, rent, mortgage, electricity, gas, internet etc….

2nd Third – Don’t forget the entertainment :  33% – the next third of every dollar you earn goes towards having fun in life, there’s no joy in cutting yourself off from the things you enjoy but here I am subscribing to a more managed and deliberate spend when having fun.

3rd Third – Create some wealth : 33% – this will be the hardest third to manage as we are used to thinking of savings – not wealth creation. The problem with savings is that we regularly dip our fingers into the cookie jar and, if we do this too often, the cookies just run out.

Summary – The rule of thirds begins by calling our savings by its real name a wealth account, so let’s be clear what this means. Money that accumulates in your wealth fund can only be spent or withdrawn or transferred to create more wealth otherwise it can’t be touched, not now, not ever. The type of investments that could possibly fit into this category would be: money going into a bank term deposit saving plan, blue chip stock registered on a global exchange, government bonds, building on an existing and successful business, property investment and works of art etc….. Until you have enough to invest then a simple bank savings account that has no fees attached, no cheque account, no credit card, no facilities other than gaining interest is the way to go.

Tips and Tricks – The trick here is learning how to adjust your overall lifestyle needs, balancing entertainment, bills and wealth saving to fit into the rule of thirds program which overtime begins to slowly create something very special called wealth. Spending less this month on entertainment could help balance out the overspend last month on excess bills, cutting back on air-conditioning this quarter could slash the electricity bill to get back into line with the ‘thirds rule’, not upgrading the car will certainly boost the wealth fund etc.. A little awareness, and having the right intention and adjusting your spending will definitely get you there..In our preparation for retirement we should always listen to the experts and get serious about what challenges are in front of us.