How to budget like a pro: Use The SNELE Method

DISCLAIMER: I am NOT a certified financial adviser nor do I have qualifications in accounting. If you need professional help with your finances, consult with a certified professional in this regard.

"A budget is telling your money where to go instead of wondering where it went." - Mapalo Makhu.

About three years ago, Darren Poke published a short article entitled “What Can We Learn From Snails?” in his blog. He says that “Snails love lettuce. They may move slowly, but they always find a way to get to their destination.

When you see them move, they do not seem to be making much progress, but they always seem to make it to the lettuce in your garden, chopping them away contently.

They understand that the lettuce will not come to them, so every night, they venture out to get their meal. Slowly. Consistently. Every single night.

We can learn something from these humble creatures. Know what you want. Take action, even if it seems small or slow. And turn up every day. Your goals will not come to you, but you can go to them.”

Never in my life have I thought I could learn anything from a very small and super slow creature like a snail until I came across this blog post. In my several attempts to find success in different areas of my life using the lessons from snails, wealth accumulation (mostly budgeting) seems to be the best fit for it.

I made up an acronym that is pronounced as snail (although spelled differently) so I can enforce the snail lessons into my budgeting practice. I call this budgeting practice The SNELE Method, where SNELE is an acronym for Saving, Necessity, Emergency, Learning, Entertainment.

For better understanding of this method, it is important first that I remind you a budget is defined as a plan for the coordination of resources and expenditures. The SNELE Method helps you to plan, coordinate and manage your money like a pro.

The basic premise of the SNELE Method is that you need to divide all your earnings into five baskets. Financial expert’s advice that we need to avoid putting all our eggs (money) into one basket. This metaphor applies mostly to investing but It fits perfectly well to budgeting too.

Now let us get into each of the five baskets and see how easy it is to manage your own money so you can start building the wealth you desire and deserve.

1.    Saving Basket (10%).

“Automate your savings and pay yourself first” – Sam Beckbessinger

A saving basket is the first and most important step in wealth accumulation. The SNELE method requires that you automate at least 10% of your monthly earnings into your savings basket.

Although savings accounts have less interest rates, compared to investments accounts, it’s important to have one as a starting point for building wealth. Define your savings goal clearly and set a deadline for each. People save for different reasons ranging from business, holidays, retirement, etc.

 Choose your goal and stick to it, no matter how long it takes. Remember, speed do not matter to snails, what matters is reaching their goal. For a snail, the goal is the lettuce but for you, it could be a dream holiday in Paris.

2.    Necessity Basket (60%).

“The person who says it cannot be done should not interrupt the person who is doing it.” – Chinese proverb

 We all have bills to pay. Rent or bonds, Cell phones and Internet contracts, Taxes, Groceries, Transport (taxis, petrol, car payments), Insurances, the list goes on and on. All these bills and debit orders are categorized under necessities in The SNELE method.

The SNELE method requires you to allocate 60% of your monthly earnings into the necessity basket. Generally, this should be the money readily available in your bank account after you have allocated all your earnings into different savings accounts of The SNELE method.

Remember, the first 10% is already deposited into your savings account as soon as you got paid. The remaining 30% is spread into three categories as follows.

3.    Emergency Basket (10%)

“Today we are one thing tomorrow another, the transformation of growth is an unseen mystery.” – Unknown

Life is an odyssey – a long and eventful journey. The events we encounter are not only mysterious and fun, but can be tragic and traumatizing. The SNELE method allows you to prepare yourself financially for these unfortunate life events; like getting sick, being involved in a car accident or any kind of incident or emergency that will require money to be taken care of.

This is called an Emergency Basket. 10% of your monthly earnings are automated into this savings account similar with the Savings Basket. Remember to name these savings accounts according to the SNELE method.

4.    Learning Basket (10%)

“True wealth is the knowledge we possess.” – R. A. Miller

When you know why you need to be wealthy, the next question you should ask yourself is how to be wealthy? There many ways to create and keep your wealth but most of them require certain skills or knowledge to be well executed to fruition.

The SNELE methods requires that you put 10% of your monthly earnings in a category called Learning Basket, which is money allocated to training or activities that will enhance your skills and talents in wealth accumulation. These include seminars, conferences, books, membership subscription fees to clubs like toastmasters for your communication and leadership skills.

5.    Entertainment Basket (10%)

“Laughter is the sun that drives winter from the human face.” – Victor Hugo

The last 10% of your monthly salary is for you to enjoy. Yippy! It is last not because it is the least important but if you are serious about creating wealth, think about the following words from by the greatest investor of all time and budgeting pro – Warren Baffet; “You don’t have what’s left after spending. You spend what’s left after saving.”

Remember, four of the five baskets in The SNELE method – Saving, Emergency, Learning and Entertainment baskets are all Easy Access Savings accounts. In case you are wondering, what happens if I don’t finish the 60% left in my bank account allocated for my monthly necessities/expenses. The answer is simple, put the remaining amount into your Savings Basket (Number one).

The best thing you can do for yourself, if you want to put extra money into your savings account and grow your wealth, is to live below your means by sticking to The SNELE method budgeting system. Through the patience of a snail, and self-discipline to control your spending impulses, you are guaranteed to have control not only over your finances but to feel in control over your entire life.