Sometimes financial advice are found in the most unexpected places and seem so obvious we wonder why we did not have the foresight to market it ourselves first!
I happened to pick up a magazine last weekend and came across this interesting financial management method using Jars. Read on below to learn how it helps you manage your money better!
JARS System From The Secrets From The Millionaire’s Mind
Basically, this simple method popularised by T. Harv Eker’s “The Secret’s of the Millionaire Mind” involves managing your money in a very visual and effective method. Based on this method, your monthly income should be split into 6 different jars:
- Necessity Account (NEC) – for everyday expenses and bills including utilities, rental, loans, etc.
- Financial Freedom Account (FFA) – for investments and passive stream incomes. Never dip into this jar and do not spend the principal!
- Education Account (EDU) – for investment in yourself, purchase of books and education through seminars and talks.
- Long Term Saving For Spending Account (LTSSA) – for nice to have purchases, e.g. a nice luxurious holiday or a luxury handbag or shoes.
- Play Account (PLAY) – for purchases you don’t really need but would like to spend on.
- Give Account (GIVE) – for charity or foundations you subscribe to
The article I read recommended splitting 50% into your necessity account and the remaining 50% into equal portions into the other 5 jars. However, the percentage you put is entirely up to you. What is most important is that you make the effort to distribute your monthly income into the above categories.
Personally, I found it quite an interesting read and something worth exploring into as it definitely helps manage your money better and you will know exactly where all your money is going. If you’ve tried this method before, do share if it worked well for you!