If you want to read an excellent book with some great ideas about how to budget your income, read All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren & Amelia* Warren Tyagi. We first heard of this book from the blog Get Rich Slowly, and we’re very glad we did. It’s a quick, easy read that makes you want to sit down and figure out if your money is “in balance.”

The idea is simple: in order for you to be successful financially in the long run, your money must be in balance, explained by the authors’ Balanced Money Formula. All of your after tax income, no matter what you do with it, falls into three categories: Must Haves, Wants, and Savings. To be in balance, your Must Haves should be 50% of your after tax income, your Wants 30%, and your Savings 20%.

The book provides easy to use worksheets to figure out what you currently use toward each category, and how much you may need to change in order to be more in balance. It also has a number of self tests to determine where you are struggling the most and then has tips on how to change. Warren & Tyagi discuss the “Thinking Traps” that people get stuck in while trying to make a change to their finances that make it difficult for them to succeed.

We believe this book would be helpful to anyone who reads it, even if you feel you’re living well and saving well on your budget. If that truly is the case, then use the information and worksheets to reaffirm that your budget is in balance. But for others, it may be very helpful to see your income broken down into these three categories. We both loved the simplicity of the process and plan on using the ideas in our own personal finances. The idea of the Balanced Money Formula is that once you get your money into balance, you won’t have to worry about it anymore because you won’t be spending too much and you’ll be saving enough. And you’ll know it.

Warren & Tyagi write:

“We can’t guarantee that you will succeed. But we can guarantee that unless you believe that success is possible, nothing will change. If you persuade yourself that you are destined to fail, then that’s one prophecy that will come true for sure. All Your Worth asks for some hard work and some lifelong changes, and that can’t happen if you quit before you start.”

Since we loved this book so much, expect some follow up posts in the coming weeks to discuss it further!

* Sorry for the typo in the original post!

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