Let’s talk about financial freedom as many people would be really curious about how to conquer this path. Talking about this, one of the most important things to know is: “Being rich doesn’t necessarily mean you’re financially free.” In fact, 95% of people have this misconception. So the biggest question on financial independence is about advice on How to manage money well. The answer briefly lies in the 6 Jars of Money Management.
What are in 6 Jars Of Money Management
The idea of this 6 jars concept is really easy to understand. It can even be applied well to your business. You just have to separate your money into 6 different jars for specific purposes. You can use physical jars, envelopes, or bank account, but I highly recommend you the most convenient way which is using a digital app like the 6 JMM, with which you only type your income amount into it then everything is done for you!
What is in 6 Jars Of Money?
1. Necessities (55%)
This jar will take 55% of your earnings, which is used for purchasing food, mortgage payments, bills, gas, oil, insurance, etc. 55% is a reasonable proportion according to many people, so if you find yourself not covering all your necessities with this amount, you properly need to do one or both of these things:
– Simplify your life – figure out how you can spend less
– Earn more – figure out how you can earn more
2. Financial Freedom account (10%)
10% of your money will go into this Financial free done jar. You must remember that The money in this jar can only be used for investments (with returns or profits). This jar is used for building wealth for your future financial freedom. You must never spend this money.
Create a Financial Freedom Jar and deposit something into it daily, however small. The idea is to keep financial management top-of-mind, and a daily commitment made towards your financial freedom.
3. Long term Savings (10%)
10% of your income goes into the jar called Long Term Savings for Spending. The objective of this jar is to save money for future expenses (e.g. a new car, a vacation, a new couch, gifts, repaying debts…).
4. Education (10%)
Successful people constantly invest in and grow themselves. Hence, 10% of your income goes into the Education jar. The more knowledge and skills you acquire, the greater you’re earning capacity. And the more you earn, the more you need to learn (how to manage your additional wealth, how to bring your income to the next level, etc.). Use the money from this jar for personal or professional development (e.g. books, courses, seminars).
5. Play (10%)
According to the rule of 6 jars, 10% of your income goes into the Play jar. It’s important to occasionally indulge yourself with a nice massage, some new clothes, a fancy dinner… To avoid over-spending or under-spending, make sure you use up the money from this jar at least every few months. This allows you to spend without guilt, and also gradually improve your standard of living as your income increases.
6. Give (5%)
10% of your income goes into the Give jar. However poor your circumstances may be, there will always be someone who is in an even more dire state. Besides the feel-good factor of helping others, giving away part of your income also helps you to subconsciously develop the wealth-mentality that you have more than enough to give away.
How To Implement 6 Jars Of Money Management?
The best way for everyone is by using the 6JMM app (6 Jars Money Management)!
In my opinion, this is really a great Money Management System as it covers most aspects, if not all, of how one usually spends their money. It is so amazingly simple, yet profound, method of better managing your money, regardless of how much money you already have!
It can work for people who never save their money, or for people who need to give to feel a sense of contribution to others/society, for those that need to learn and grow through learning, for anyone who just needs a little more help in managing their money.
I highly recommend T. Harv Eker’s Money Jar system to anyone who wants to obtain financial freedom.