I’m always looking for money saving tips and investment ideas. It’s actually part of my job in the banking industry. Trying to translate what I’ve learned in the business, I wanted to apply it to our life: create extra cash for rainy days. I was confident in the investments we were making as a family, and I was also spending money in a very sustainable way. But still, the things I really wanted—like more income, more freedom, and more time with Peer, Oscar, and Casper—were still challenging to find. But why?
I started to understand that I just didn’t have a clear system that would lead me to financial freedom. I needed to understand more about my relationship with money. What is my financial blueprint? What is a financial blueprint?! What are my spending habits and where do those come from? I tried many different strategies, and finally, I implemented one very simple money management system, and guess what? It really works!
Does the idea of a money management system seem weird to you? I know, it probably does. But, believe it or not, what I’m about to explain to you ALWAYS WORKS—no matter what your annual salary is. The only thing you need to focus on is getting disciplined. With this, you can create financial freedom and start using money as a tool to reach your goals and dreams. All you need is the right mindset. And that’s why I’m here!
The foundation of our money management system is the Six Jar Money System developed by T. Harv Eker. I learned about this surprisingly simple strategy in one of the Millionaire Mindset courses. The idea is to separate your total income into six different accounts (or jars) for specific purposes. Within my online banking account, I’ve organized the different accounts but you can also use physical jars or envelopes. The most important thing is consistency. You’ll need to make sure that you’re depositing into these jars or accounts on a regular basis.
JAR 1: Necessity
Normally, up to half of your income (guideline is max. 55%) goes toward real necessities. Between food and clothing, those are mortgage payments, taxes, energy telephone an internet bills, childcare etc. If you can’t cover all of your necessities within 50%-55% of your income, you need to do one (or both) of these things:
- Spend less: Look very critically at your payments and figure out how you can spend less
- Earn more: Look at different possibilities and figure out how you can earn more
JAR 2: Financial Freedom
10% of your income goes into your Financial Freedom jar. 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. There is one very important rule: you never spend this money. That is to say, you will be able to use the profits from this jar only after you reached your level of financial freedom.
JAR 3: Long-Term Savings
Many of us have a saving account. Just make sure that at least 10% of your income goes into this jar. The goal of this jar is to save money for future expenses like travel (!), furniture, gifts, repaying debts, or things like replacing an old washing machine. As we are wanderlusters, we put more than 10% into this account to cover all our expenses.
JAR 4: Education
Successful people constantly invest in themselves by education. Therefore, since you want to be successful as well, 10% of your income needs to go into the Education jar. The more knowledge and skills you acquire, the greater your earning capacity. And the more you earn, the more you need to learn. Use this money for your personal or professional development, like books, seminars, and training.
JAR 5: Play
10% of your income goes into the Play jar. It’s important to occasionally indulge yourself with a massage, nice shoes, a fancy dinner… In contrast to the Financial Freedom jar, make sure you use up the money from this jar every month. This allows you to spend without guilt, and to also gradually improve your standard of living as your income increases.
JAR 6: Give
5% of your income goes into the Give jar. We usually spend this money on charities, gifts, or money collections. Even if you don’t have much money, you can always give your time. Perhaps cooking a nice meal or help someone with shopping or with work in and around the house. Besides the feel-good factor of helping others, giving part of your income also helps you to subconsciously develop the wealth-mentality that you have more than enough.
Obviously, these are just guidelines. Depending on your financial situation, you may need to adjust the percentages slightly. Even if you are currently in debt or heavily using your credit cards, you can really start managing each coin very well. This system ALWAYS WORKS. And that’s all the reason you need to start using it. And you can start right now!