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October 7, 2014

Six Month Rule-Part Two

In an earlier blog post I wrote about the Six Month Rule.  When desiring to make a larger purchase or have a new payment for example automobile or increase in rent/mortgage payment you save that payment or the difference in payment for six months before acquiring your large purchase.

Here is another version of the six month rule to practice in your life.  When you receive a raise or new job with increase, you don’t use that increase in your regular budget.  For six months you take that increase and do one or a combination of these things: Give, Pay off Debt and Save.

For example you get a raise making $500 more a month.  If you are completely debt free, you can use that money to give to others, give to your local church, give to family members.  There are many times I hear people say I would like to help my parents, or I would like to give more to my local church but then when increase comes in our life, we end up spending that money on ourselves, or not even really seeing a difference in our living, due to eating out a little more, maybe driving a nicer car, etc.  So if you are debt free, try using this money that you were living without before to help others; your church, family, friends, etc.

If you have debt, and you receive an increase or promotion, for the first six months or longer if you will use that money to attack your debt, you can see some real progress in becoming debt free.  Again, you were making it before you had that raise, I know we all can use more money, but chances are if you are in debt and receive a raise or promotion you end up getting deeper in debt due to poor financial choices.  How much better would it be for you to take that money and apply it towards being debt free.

Using the increase for savings is another great way to save money.  Many people would like to save more money just don’t see how they can do that each month, or save a small amount and sometimes use some of that money.  Again, since you were making it before your raise, new job, or increase, why not use the opportunity to save some money and build an emergency fund, especially if you don’t have any savings, and if you do, to increase the savings you do have at a faster rate.

Of course you can adjust this six month rule to work for you and your specific financial situation; you can also do a combination. For example if you have debt and also the desire to give more, why not use half of your increase to apply towards your debt and half of your increase to give to your local church or choice of charitable contribution.  Or if you are debt free, saving half and giving half, whatever works the intent is, instead of just allowing this increase to absorb itself into your current budget and not really see a tangible difference, put your increase to work for you.  Instead of just going out and getting a bigger house, or bigger car, and acquiring more debt why not think of others, or help your parents get new tires for their car, or even a brand new car. 

My husband and I have done different variations of the six month rule at different times in our life and we were very happy with applying this in our life.  We have used an increase in pay or at times “commissions” (if you are in sales) money that we were not counting on in our regular budget plan, to attack debt, to give more in our local church, and at times to save and build our emergency fund. 

Too many times we think if we get this raise or new job, our finances will be better off, only to find, yes it makes things a little easier, but unless you have a plan and purpose for that increase it is quickly absorbed into our life with no real difference.  Someone taught us this six month rule and it has benefited our life, so I thought I’d share with you.

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