Practice 10-10-2-20 And You’ll Be Set Financially

As you go through life, you’ll quickly discover that most people struggle with money and finances–and this tends to be true regardless of how much money they make. So, if you’d like to avoid that, you’ll want to follow a simple formula that, if followed, will ensure that you’ll never be in bondage to money and debt.

Now, I have to warn you, up front, that you and your friends will want to tip this formula on its head and follow it from the wrong direction–but don’t. Follow it as laid out and you’ll be richly blessed. I call it, “10-10-2-20.”

So, here’s the simple formula

  1. Give God the first 10% of what you make (i.e. the amount BEFORE taxes, also known as your gross wages)
  2. Put the second 10% in savings/investments
  3. Pay your taxes
  4. Pay your obligations (starting with your rent or mortgage and any other bills/amounts payable)
  5. Live on the rest

The reason I call it 10-10-2-20 is that the hardest part to remember (and do) is the honoring God first part and then, secondly, to honor yourself by saving/investing the second 10% (hence 10-10). However, your financial goal in life should not be to do the minimum, which is why I advocate that your goal should be to get to the place where you’re giving away 20% and investing 20% (the 2-20 part). If you can remember 10-10-2-20, then you’ll remember the rest of the formula (taxes, then obligations and then, only after everything else has been taken care of, living on the rest).

The reason most people are in a financial jam (and I know people who make over $700K/year who don’t have money saved up) is that they like to reverse the order. Most people want to spend whatever they want on whatever they want, then they pay the least amount possible on their debts and obligations, then they begrudgingly pay their taxes, and then with what’s left over, they put a little away and maybe put a few dollars in the collection plate–and then they wonder why they’re in such a financial mess! Why? Because they reversed the order. 

Now, I know when you’re young, it’s hard to think about tithing (honoring God with the first 10%) and/or putting 10% of your money away in savings and investments–but this is exactly when you need to learn to do this. Why? Because if you don’t start tithing on $100, you won’t on $1,000 or $10,000 or $100,000 or $1,000,000. Remember, first you make your choices, then your choices make you.

Likewise, if you don’t start saving now, you probably won’t later. Why? Because later never arrives and you’ll have trained yourself to spend on you first.

Now, when it comes to your first savings goal, I’d suggest that your first goal should be to accumulate a minimum of three month’s worth of expenses in your savings/checking account. That means that if your monthly expenses come to $2500/month, then you need to do everything you can to acquire $7,500 in your savings/checking account as soon as possible. Then once you do that, you’ll want to expand that to 6-12 months of expenses. 

Why? Because life doesn’t always work out perfectly–and you want to be prepared for that. What happens if your job gets eliminated? Or your car breaks down and needs an expensive repair? Or you get sick and can’t work for awhile? You always want to be prepared ahead of time for the unexpected (that’s life). Plus, when you do this, you’ll find that it’ll greatly reduce your stress. I’ve never understood why so many people choose to live paycheck by paycheck. You don’t want to be that person–you want to create lots of financial margin. And the more margin, the better (which, equates to less stress). Plus, it’ll open up all kinds of options and opportunities for you when you have financial margin.

Now, if you’ve been following my argument, then you know that this means that you can’t simply spend what you want to spend on whatever you want to spend it on (there is no success without sacrifice). What you get to spend (whether it’s on fast food or clothes or makeup or a car or a TV or …) is always based on the first four steps having been completed. In other words, if you haven’t honored God first or put money away second or paid your taxes third or paid off all your obligations fourth (starting with your rent/mortgage), then you shouldn’t be spending money going out with friends or buying a new outfit. You should only do those things with what’s left over AFTER the other four are met (not the other way around).

If you choose to follow this formula, you’ll be set financially. If you don’t, you won’t. Just remember, first you make your choices, then your choices make you. So, choose wisely!

Subscribe to these posts

If you'd like to have these life lessons sent directly to your email inbox, just enter your email address below (and don't forget to click the link in the confirmation email from feed burner).


  1. If Someone Somewhere Is Succeeding At What You're Not, Own That You May Be the Problem | The Johnson Letters - September 21, 2014

    […] right thing, they automate the right thing. Note: If you haven’t read my Johnson Letter on the 10-10-2-20 plan, make sure you do so […]

Leave a Reply