The rule is a popular budgeting guideline that suggests allocating your after-tax income into three main categories: needs, wants, and savings. For example, here’s a 50/30/20 breakdown of a salary distribution based on this rule:

• Needs (50%): Allocate 50% of your after-tax income to cover essential expenses and obligations. This category includes items like rent/mortgage payments, utilities, groceries, transportation, insurance premiums, minimum debt payments, and other necessary expenses.

• Wants (30%): Allocate 30% of your after-tax income to discretionary spending and non-essential expenses. This category covers things like dining out, entertainment, hobbies, vacations, shopping for non-essential items, and other personal preferences.

• Savings (20%): Allocate 20% of your after-tax income to savings and financial goals. This category includes contributions to your emergency fund, retirement savings, investments, debt repayment (above the minimum payments), and any other long-term financial objectives.

The 1% rule of savings model is the most basic model to understand how to start savings and implement it in real life. It is a super-valuable model for focusing your next step on financials and still, it doesn’t requires you to reorganize your monthly income and expenses roughly.

Here are some of its benefits:

• Easy to Start: The 1% Rule is incredibly accessible, allowing you to begin saving with a small percentage of your income. This makes it easy to start building a savings habit, regardless of your current financial situation.

• Gradual Transition: By gradually increasing your savings rate over time, the 1% Rule allows for a smoother transition. It allows you to adapt to changes in your income without feeling a significant strain on your budget.

• Sustainable Savings: The 1% Rule promotes sustainable savings. Since it starts with a small percentage, it ensures that your savings goals are achievable and realistic.

• Consistency and Discipline: This is probably the most important point in this article. By automating your savings, the 1% Rule helps foster discipline and consistency in your financial habits. Since the savings transfer occurs automatically, you are more likely to stick to your savings plan and build a solid foundation for your future.

• Financial Progress: Gradually increasing your savings rate allows you to see tangible progress over time. As your savings grow, you’ll experience a sense of accomplishment and motivation to continue saving and reaching your financial goals.

• Flexibility in Budgeting: The 1% Rule doesn’t require significant sacrifices in your budget. It allows for flexibility in managing your expenses and finding a balance between saving and spending. This flexibility can help reduce financial stress and increase overall financial well-being.

• Power of Compound Interest: By consistently saving and allowing your savings to grow, the 1% Rule harnesses the power of compound interest. Over time, the interest earned on your savings can significantly boost your overall savings, helping you achieve your financial goals faster.

• Long-Term Financial Security: Implementing the 1% Rule sets you on a path toward long-term financial security. By developing a savings habit and gradually increasing your savings rate, you’re building a safety net for emergencies, funding your future goals, and working towards a more secure financial future.

TRIZ is a problem-solving methodology developed by Genrich Altshuller. It aims to identify inventive solutions to problems by analyzing patterns and contradictions. Key concepts in TRIZ include:

• Contradictions: TRIZ recognizes that many problems arise from conflicting requirements or contradictions. By resolving these contradictions, innovative solutions can be found.
• Patterns: TRIZ categorizes problems and solutions into various patterns based on their characteristics. These patterns provide insights and serve as a resource for generating inventive ideas.
• Inventive Principles: TRIZ defines a set of principles that can be applied to overcome contradictions and generate creative solutions. These principles are derived from the analysis of successful inventions across different domains.

The Dreyfus skill acquisition model describes the progression of an individual from a novice to an expert in a particular domain. It suggests that skill acquisition involves moving through five distinct stages:

1. Novice: Novices rely on rules and guidelines to complete jobs since they have little experience. They need specific guidance and can’t manage challenging or unexpected tasks on their own.
2. Advanced Beginner: Advanced beginners gain a bit more experience and start recognizing recurring patterns. They can perform tasks with less guidance but still lack deep understanding.
3. Competent: Competent people are better at making decisions based on their past experiences and have greater knowledge. They understand the subject thoroughly and are skilled at finding solutions to issues.
4. Proficient: People who are proficient in a field have a comprehensive grasp of it and are able to draw conclusions intuitively. They are more adept at seeing the “big picture” and may change their actions depending on the situation.
5. Expert: The final stage of the model. Experts are able to complete tasks with ease, generate thoughtful conclusions, and offer original solutions. Experts frequently make decisions based on intuition and may not be able to clearly explain how they arrived at such decisions.

At its core, the Dreyfus model presents a process of skill development and mastery from scratch. The transition between the stages involves the ability to move from the clear rules in the beginning stage to actions based on intuitive knowledge. In other words, the more you act intuitively, the less you act systematically, which indicates that control and knowledge are another name for expertise.