Finance expert, Dave Ramsey once said, “Living right financially is not complicated; it may be difficult, but it is not complicated.” If this is true, how can we make it easy? Good thing we’ve discovered a new method of personal and/or family finance management– Budget Jars. This was originally proposed by T. Harv Eker in his book Secrets of the Millionaire’s Mind: Mastering the Inner Game of Wealth. The jars themselves aren’t actually that important. What’s more important is the money management system behind them. Budget jars can be a set of bank accounts. Or if you just want to add a little fun to your budgeting experience, take it as it is and buy some mason jars. Whichever your take, literally or metaphorically, you use 6 jars and allocate them for a purpose.
Jar 1: Basic Necessities (55%)
You have to allot 55% of your budget for daily expenses, bills, rent, transportation, groceries, food, and taxes.
Jar 2: Entertainment (10%)
This part of your budget is for the things you don’t spend on a regular basis. It can also be called as the play jar where you can spend this particular budget as you may. Its purpose is to fulfill your heart’s desire. You can spend it for massages, short-stay vacation, movies or concerts.
Jar 3: Long-term savings (10%)
Also known as the retirement fund, this budget can never spend until you’ve reached financial freedom. This will be used as your passive income like the fund for starting a new business and for investments.
Jar 4: Education (10%)
These savings is for personal growth and development purposes and further education especially if you want to take up classes or course of your interest such as dance lessons, cooking classes or level up to a higher degree of education, maybe masters or doctorate. You can also spend in tools that will help you achieve it such as books, training manuals, and other instructional manuals.
Jar 5: Private Reserves (10%)
Another 10 percent of your budget should go to your large purchases. It is important to save this in the long term and make sure to replenish it right away after spending. If you want to buy a flat screen TV, new gadgets for the kids, a car, out of the country trip this is where you put your money in.
Jar 6: Charity and Gifts (5%)
The final 5 percent should be allotted for gift giving and donations. You can get money from this jar if you need to buy gifts for birthdays, weddings, Christmas and other important life events or if you want to donate something for charities you wholeheartedly support the animal shelters, cancer patients organizations or if you simply want to help someone out with your little extra.
You may have upped your ante trying out different budget techniques but this one is definitely one of the most effective ways to manage your hard earned money. It is okay if you don’t use the exact percentage or expense categories, add an emergency fund it as necessary, because let’s face it priorities differs from person to person. Try to use this budget jar method as a guide and make adjustments that will work best for you along the way.
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