We’ve been discussing the WMD Savings method or plan. WMD stands for Well, Mule and Distributor. With a detailed description of the plan laid out, we can now put the plan together to look at how it works. If you’re new, then be sure to read up on these posts:
After you’ve read up on those, come back to this post for a bit of an overview, and application of the plan.
What Is the Goal of This Plan?
Simply put, it is to help you save money. The underlying goal is to force you to cut back on your spending, and live off of less. Living off of less not only makes saving easier, it also allows your savings to go further when you’re forced to live on it. Example:
You have $80,000 in savings, you make $40,000 a year and you get laid off. How long can you live on your savings?
- If you require $40,000 a year, then you can get by for two years.
- If you require $20,000 a year, then you can get by for four years.
You have $0 in savings, you make $40,000 a year and you want to save $80,000. How long will it take?
- If you require $40,000 a year to live, then you’ll never be able to achieve it.
- If you require $20,000 a year to live, then you’ll achieve your goal in 4 years.
Of course, both of these examples are extremely simplistic, but at the end of the day accumulating savings has an extremely simple rule and it applies in every situation where someone is wealthy. Not a single wealthy person on this earth deviates from this rule and remains wealthy:
The rule of accumulating savings is to spend less than you make.”
It really is that simple.
Brief Overview of The Plan
You should have been able to garner this from the posts, but in case you didn’t read those the plan works like this:
- You get a paycheck.
- Your Distributor puts a determined amount of money into your “Well” account for your everyday expenses (gas, food, etc.)
- The remainder of the paycheck goes into your “Mule” account. This is the account you pay your monthly bills out of.
- After all of your monthly bills come out of your “Mule” account, you should have some money left over.
- Pretend that the “leftover” money doesn’t exist and let it build into a savings.
- Gradually, you should be able to adjust the amount going into your “Well” account down so that you live on less. This will allow you to maximize the amount of money you’re saving.
Can This Replace A Budget?
This should not replace a budget, but it can be considered a sloppy budget to help get you on the road to budgeting. It’s just like a beat-up, used car, it has 4 wheels and it will get you to where you’re going. Are there better things out there? Of course! I consider a full budget to be the best option out there, but you need the discipline to establish that.
In order to drive a Ferrari, you first must learn to drive. So use this beater of a plan to get you started, but always strive towards doing better. At the end of the day, a well formatted, well thought out, well executed budget will be the best weapon you have in your financial arsenal. As always, if you have any questions, always ask in the comments!