Definition: Money Smart Allocation
by MSE Staff | Published 03 Jul 2021 (Updated 5 Nov 2021)
Money Smart Allocation is a system designed for you to pay yourself first. The Money Smart Allocation system states that 55% of your income should be allocated for investments, and 45% of your income is allocated for expenses. This ensures that you are focused on increasing your net worth and financial wellbeing.
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How does Money Smart Allocation differ from a budget?
A budget is a plan for how you want to spend your money. Sadly, that’s what many people do when they budget away all of their income. Budgeting is often accomplished outside the scope of building wealth. Money Smart Allocation focuses on the key areas for building wealth and requires you to cut down on wasteful spending. The end goal for the Money Smart Allocation system is an increase in financial wellbeing.
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