This budgeting frame is particularly appropriate when paying off ‘negative wealth’. When people have debt negative wealth, the customary advice is ‘don’t save; throw everything to pay it off’. I happen to disagree with this and from the very first days of my financial awakening I set myself two goals: one pay negative wealth and pay it fast; and two build up an emergency fund and savings. As it turned out I am in good company and Arkad, the richest man in Babylon, also agrees with me. Arkad’s advice to people who have negative wealth and wish to become wealthy was the following:

Ten percent of all you earn should be saved and invested.

Twenty percent of all you earn should be used to pay debts negative wealth– if the amount is insufficient one should negotiate with their creditors firmly and convince them that this all that they can afford but that they will pay diligently.

Seventy percent of all you earn should be used to cover all living expenses.

Currently we put 21% of our monthly net income to pay off negative wealth; 14% of our monthly income is saved and a proportion of this is invested; and we cover all our living expenses using the 65% of our monthly income that is left.

I have mentioned before that the real beauty of this system is that it uses percentages rather than absolute numbers. I will not change the proportions – although we observe these only when applied to our regular monthly income; any occasional earning, mainly husband’s, are thrown at the negative wealth at present. Using this budgeting frame also focuses attention on the fact that the way to increase payment(s) in absolute terms one ought to earn more.