How To Manage Your Money With "The 6 Jars System" (No Matter if You're a Saver or a Spender)
Inspired by @surfermarly's money related article of yesterday, I thought I'd share this little system which has been the most practical money advice I've ever learned.
The Six Jars System
The author of this system is T. Harv Eker, author of Secrets of A Millionaire Mind and sort of "the Tony Robbins of money". I'm not a big fan of his, but this little tidbit really is very valuable.
What I like about this system is that it works for both savers and spenders. Because that's how we can categorize people (in a very broad sense) when it comes to money.
Spenders live in the moment and forget about planning for tomorrow, and savers are preoccupied with planning for tomorrow and forget to live now.
Both camps have to become conscious of finding a good balance. Otherwise one will die broke and the other will die rich. And dying rich is not really any better than dying broke, is it. You're still dead, LOL
This is how the Jars System works
Allocate a percentage of your income to six different purposes, like this:
55% goes to Necessities (NEC), which includes your monthly fixed, basic costs, like rent, food, electricity bills, etc.
10% goes in to a savings account for unexpected costs, like when your car or washing machine breaks down and needs to be fixed. This is called Long-Term Savings for Spending (LTSS)
10% gets allocated to Fun stuff (PLAY). Things you treat yourself to - going to the movies, having a massage, etc.
10% goes to Education (EDU). Seminars, workshops, coaching, books, etc.
10% goes into your Financial Freedom Account (FFA). This could be to save up for taking a year off to travel the world, for example, but most importantly you should use this part to invest, so that your money can grow and work for you instead of you having to work for money for the rest of your life.
5% is reserved for Giving. In order to keep the energy flow of giving and receiving working, it's important to use a small part to contribute to other people in some way.
Are you a saver or a spender?
I was brought up to be a saver. I (literally) had several jars ever since I was five years old.
I'm a really good money manager. However, I noticed one day that I did not have a PLAY account! I was always very stingy when it came to spending money on myself. If you're a saver, too, you may recognise that.
So while this may sound ridiculous to a spender, I actually have to set a budget aside for fun things and basically pay myself an allowance. So the above system really helps me.
On the plus side - which may be a struggle for a spender - I have never been in minus in my account, and sometimes go long periods without substantial income, and still live well. Some people think I spend my time sitting in cafés all day! (Even I believe that sometimes...) Because whatever I need - I probably have a jar for that! LOL
How do you practically split your money up every month?
My Dutch bank had the option to create sub-accounts for different purposes. Since I moved back to Germany, I don't have that option anymore. I still have my Dutch account, so I do my long-term savings there.
Check if your bank allows sub-accounts or "savings goals", which would be the simplest way to do that. Otherwise there are millions of money management apps today, that can help you with that. And if you're already living 100% off crypto, well, then just open a few wallets :) Easy.
Whether you're a saver or a spender - do you consider this system useful?
Do you already have some sort of system in place?
Do you have any tips for the rest of us?
PS: Jars 7 and 8
Maybe it's my German-ness, or Mr. Eker really missed that: Of course I also have a separate jar (account) where I save for my annual income taxes, as well as my quarterly VAT payments (as a business owner). I don't ever want to be surprised by bills that I can't afford to pay ;)
If only I could be so organised! I think the categories should be expanded to saver, spender and lucky. I am a lucky spender. :)
Yes! And I'm a lucky saver
Love the jars idea... it's something that is kind of incorporated into the You Need a Budget software, which is what I use now.
I'm kind of both a spender and a saver... I think I switch between both of these mindsets!
That sounds healthy :)
I really loved to see that you felt inspired by my article! That's the way steemit works. It has happened to me so many times, and I can totally relate. It's one of the things I love most about this place. Thanks for keeping the ball rolling :-)
Have a great day!
Nice post upvoted!!
This is very good advice, presuming of course, that your income leaves any room for margin.
Most people don't have any margin to speak of, even in the western world. I think most people would rejoice at the possibility to have to think about making a budget for their non-existent surplus.
I agree, though the author insists that you should make this split even if you only have one Dollar... And of course he has lots of success stories to share, of people who made it from $1 to millionaire... This is why I'm not really a big fan of him; it's all a big hype. However, like you say, for people with a regular income that covers their living costs, this is a pretty good system.