The Rayo Money Framework

9 min readFeb 26, 2021

Take charge of your personal finances with the Rayo money framework

Part 1: Understand your income and track your expenses

The concept of money as we know it has undergone radical transformations since the modern homo sapiens first created a barter system to exchange goods and services.

Today, money is a store of value. It’s what you use to buy stuff, to explore leisure-time activities, and to build a life of comfort. In fact, a lack of money can seriously affect the quality of your life, as well as the lives of those who depend on you. Moreover, an unexpected event or personal setback like a medical emergency, job loss or divorce can have a disastrous impact on your current and future well-being. All of this is true regardless of your personal circumstances, career choice or family background — whether you’re a U.S. citizen or new immigrant, man or woman, senior citizen or young adult.

And that’s why it’s important to manage your money.

If you’re not sure where to start, the Rayo Money Framework is here to help!

Greater financial stability and economic independence are within your reach with the Rayo Money Framework. All you need is patience, commitment, self-awareness, and a willingness to keep learning and improving!

In this 3-part blog series, we will show you everything you need to:

  • Understand your current financial situation
  • Identify gaps you need to address
  • Set goals and objectives to achieve financial independence
  • Take the necessary actions to achieve these goals

Think of the framework as a “living document” that you regularly update and personalize as your needs and goals change. Each part includes step-by-step ideas to help you create your unique financial plan. In the first article, we will talk about two of the most important aspects of your money situation — your income and your expenses. Part 2 will address another key aspect — your savings. And the third and final part is about insurance and investment, two money matters that most people typically ignore, or are unaware of. Make sure you review these three articles in the right order to get the most value out of them.

Greater financial stability and economic independence are within your reach with the Rayo Money Framework.

Ready to get started?

Let’s dive into Article 1!

The 5 Parts of the Rayo Money Framework

The Rayo Money Framework consists of 5 key elements.

  • Income
  • Expenses
  • Savings
  • Insurance
  • Investments

How to use the Rayo Money Framework:

  • Block out some time to thoroughly review it (it’s an extensive process, so be sure to block out 2–3 hours across three days to complete it!)
  • Print it out if required
  • Identify the key action items that apply to you
  • Assign dates to each item so you have a goal to work towards
  • Track your progress regularly
Figure 1

Understand your Income

Let’s start at the beginning. Without income, there can’t be any savings, investments or insurance, so it’s critical that you get this part of your Rayo Money Framework exactly right.


Understand how much money you’re bringing in from your regular job, business, or other sources of income.

Take a look at the table below and fill it out. We have filled out a couple of rows to help you get started. Feel free to add or remove rows or columns as per your unique personal situation. For example, if you have a couple of side hustles going on in addition to your regular job, say you tutor high school kids and you earn money from Amazon affiliate marketing, add these to the table, and update each row accordingly.

The table is so simple that you can use Microsoft Excel or Google Sheets to manage it. No complex personal finance app or software are required!

Figure 2

Helpful tips:

  1. Gather your bank statements, salary slips and other documents to clarify your income sources
  2. Calculate your weekly, monthly and yearly income
  3. Update the table on the first or last day of each month
  4. For “irregular” income sources, use the best estimate or average figures to populate the table each month


Now that you know how much you’re earning, you’re ready to create your budget.

Use the 50–10–20–20 Rule to allocate a fixed amount from your income to each of the below items:

What does this rule mean in practical terms?

Simply put, it means that you break down your income into 4 key parts, and allocate an amount to each part every month.

Figure 3

So, if your total monthly income is $5,000, here’s what the 50–10–20–20 Rule will look like for you:

Figure 4

What this means is that out of a total income of $5,000, you now know the:

  • Maximum you can spend on living and lifestyle expenses
  • How much you should put aside in an emergency fund
  • How much you should save or invest

Now that you know how much you’re earning, you’re in a better position to figure out the rest of the framework as it applies to your unique situation.

Track your expenses

This part of the Rayo Money Framework can be a bit tricky because it requires being honest with yourself — something that a lot of people struggle with. If this sounds like you — it’s okay! Remember that the Rayo Money Framework is meant to help you create the plan for yourself. And that’s why, the more honest you are (with yourself), the better your plan will be. This will help you sort out your finances in no time!


Prepare to ask yourself these 4 questions:

  1. What do I spend my money on?
  2. Am I spending on needs or wants?
  3. Is there a need to cut down on any expense(s)?
  4. Is there a need to reallocate the money spent on one item to another item?

To find the answers, move to Steps 2 and 3, and then come back to this step.


Now it’s time to take action on the 50–10–20–20 rule we discussed in Part 1. Let’s tackle the Living and Lifestyle expenses bit first. Then we will discuss Savings and Emergency Expenses.

Before we get into the details, do you remember how we allocated 50% of your income to living expenses and only 10% to lifestyle expenses?

Figure 3 (again)

What do these percentage amounts really mean?

It simply means that you can spend 50% of your income on living expenses, and only 10% on lifestyle expenses.

Such an allocation will help you control your expenses, so that you don’t overextend yourself on leisure expenses, like vacations or shopping if your income doesn’t “allow” it.

For example, say you want to book a two-week vacation to Hawaii in March.

Expected cost of the holiday = $3,000

According to the 50–10–20–20 rule, since you are allocating 10% of your income ($500) per month to lifestyle expenses. So this is what your Lifestyle budget will look like in March:

Figure 5

By March, you should have saved at least $3,000 in your Lifestyle budget to fund your Hawaii vacation. However, you are short by $1,500. This means that the earliest you can take your vacation (assuming the cost of the holiday remains $3,000) is June.

Figure 6

Now, let’s get into the nitty-gritties of living and lifestyle expenses.

First, identify your expenses and allocate them to either the Living column or Lifestyle column.

Remember, as per the 50–10–20–20 rule, you allocate:

  • 50% to living expenses
  • 10% to lifestyle expenses

Living expenses for Month 1

Monthly income: $5,000

Amount available: 50% ($5,000) = $2,500

Figure 7
Figure 8

Figures 6 and 7 will help you identify and track your expenses from month to month.

Now, your expenses will likely vary from one month to another, so you should track your expenses at the end of every month. Use the below table:

Figure 9

According to Figure 9, by the end of the year, you would have saved $1,700 on budgeted living expenses, and $2,340 on budgeted lifestyle expenses.

Both Figures 6 and 7 show savings. However, you may also experience some shortfalls, say due to an unexpected expense, or due to a sudden increase in the price of something else. And that is okay, as long as you try to adjust your expenses in the coming months. The main aim is to ensure that by the end of the year, you don’t overshoot your budget for either living or lifestyle expenses.

And what if you have saved some amount on your budget?

This is the best situation to be in!

In our example, since you have achieved savings in both living and lifestyle expenses, you can:

i) Carry this money forward for next year’s living or lifestyle expenses

Implication: Your budget for next year will be slightly higher than the previous year.


ii) Move it into your Emergency fund account (see Part 3: Savings)

Implication: You will have more money in the account and therefore a bigger “cushion” if something goes wrong next year.


iii) Invest it (more details on Investments in our third blog post)

Implication: You can invest more money for your future.


Remember the 4 questions from Step 1:

  1. What do I spend my money on?
  2. Am I spending on needs or wants?
  3. Is there a need to cut down on any expense(s)?
  4. Is there a need to reallocate the money spent on one item to another item?

Once you identify your expenses, you will have clarity on Questions 1 and 2.

Next, identify if there are any expenses you can cut down on for the foreseeable future.

So, if you are struggling to meet your monthly living expenses, or plan to spend your Christmas vacation in Florida, but are unsure if you will have enough funds, check if you can cut down on some other expenses.

Try these tips:

  • Review your “needs” (lifestyle expense) and “wants” (living expense)
  • Prioritize what is important, necessary or both
  • Understand if you have mistakenly identified a need as a want, and see if you can cut it
  • Cut all expenses that are unnecessary, unimportant or purely discretionary (i.e. you can live without them without affecting your day-to-day life)
  • If completely eliminating a regular expense is not possible, cut a percentage amount every month that you can live with


Now that you have clarity on your Income and Expenses, it’s a good idea to track them together. This is because when you can see both your inflows and outflows in one single sheet, you get a complete picture of your current financial situation.

Here’s a simple table you can use on a monthly basis to simplify your life. You can also create an annual version. Use Excel or any spreadsheet application.

Going back to our previous example:

Now you know whether you’re in a good position to allocate money to your emergency and savings funds as per the 50–10–20–20 rule.

Next: Part 2: Get Started on your Savings Plan

Now that you have your income and expenses in order, are you ready to tackle the next part of your financial plan? In Article 2, we explore and simplify ideas about your savings. Stay tuned for the second article coming up next week!



The contents on this site and the Rayo Money Framework are for informational purposes only and does not constitute financial, accounting, or legal advice.




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