Sticking to a budget can be HARD! But it’s not the lack of “know-how” that keeps you from sticking to a budget, but the lack of discipline.
Today, I’m going to introduce you to the Jars Money Management System.
It’s a simple money management system that will help you overcome spending problems and stick to a budget so you can be on your way to financial independence.
It all starts with managing your money. And because this is such a simple system, don’t think it isn’t effective. Because it is.
Two reasons most people don’t manage their money:
- It restricts their freedom
- They don’t have enough money to manage
You can overcome these limiting beliefs by learning that managing your money,.
Managing your money doesn’t restrict your freedom, in fact, it’s the opposite. And more important than the amount of money you have is the habit of managing what you do have. Whether it’s $100 or $100,000 you’re going to manage them the same.
Money management doesn’t have to be boring and complicated. The secret I’m about to share with you may surprise you how easy, simple, and effective it is to control your money so it doesn’t control you.
It’s called the JARS system.
How I Learned About This
I learned about this from the book “Secrets of the Millionaire Mind.” How it works is you take six actual jars and you divide up your money into each jar for different purposes.
Each jar is labeled for different spending/savings goals. When you get paid, withdraw cash and divide it up among these different jars.
When I first heard about the Jars system I thought it would be too difficult using cash and jars to manage my money. But after doing it, I realized how simple it was.
When I started this, I was a 16-year-old working at a car wash. I would come home with a wad of $1 bills from tips and it made it easy to divide them up into each jar.
Dividing up my dollar bills became a daily habit. This made it really easy to do each time I got paid as well.
It was motivating to watch each jar grow and I couldn’t wait to get paid so I could save money. My savings rate was over 30% at age 16 and I’ve managed to keep a high savings rate since. Always at least 10% – 20%.
“Rich people manage their money well. Poor people mismanage their money well.” – T. Harv Eker
Since using this money management system, my net income has nearly always been positive. It has forced me to be frugal, and it has accelerated my savings goals. This system is so simple you can even teach your kids.
Many people find this difficult because cash can be a hassle to work with. After a year or two of doing this, I moved everything to digital jars.
I opened up one checking account and five savings accounts and divided up my money electronically. At a bank, of course, that doesn’t charge fees.
Here’s how the jars money management system works:
But first, consider downloading the free PDF.
6 Jars Money Management System
Jar #1 – Necessities (50%)
This jar is for your necessary living expenses.
Actual needs such as your rent/mortgage, car payment, food, insurance, and anything else you consider a necessity.
This forces you to distinguish between a need vs. a want. You may be thinking, “how am I supposed to live on 50% of my income?”
For this to work, you may have to cut back on unnecessary expenses.
If you think that you need more than 50% for necessities, then you need to do one of two things:
- Simplify your life – figure out how you can spend less
- Earn more – figure out how you can make more money
Both options are doable. The best would be that you do both!
Jar #2 – Financial Independence (10%)
Your savings and investment account.
10% of what you make is ALWAYS yours to keep. You could make $10,000 a month or $20 a month, it doesn’t matter. 10% of your money goes to your future and is to NEVER be spent (until you hit financial independence).
Once you achieve financial independence, this is the money that will provide you with passive income.
If you’re serious about reaching financial independence, this is where you will dump all of your extra money. It can be in an investment account such as Vanguard or your 401k.
This jar doesn’t have to stay in cash, in fact, I recommend you put it toward an investment as soon as possible.
Jar #3 – Long-Term Savings for Spending (10%)
An additional 10% of your income will be saved toward long-term purchases such as a down payment on a house, a child or a large purchase in the future.
You may be thinking, “you want me to save 20% of my income?”
Quite frankly — yeah.
How serious are you about building long-term wealth and achieving financial independence?
Jar #4 – Play (10%)
Before you think I’m only a disciplined saver and recommend that you never do anything fun, let me give you some room to relax.
10% of your income goes to blowing your money on WHATEVER you want.
Date nights, massages, concerts, and weekend getaways. You’re budgeting to play, not only save.
This will assure that you have money to have fun and enjoy life, but you won’t blow the bank (or the Jar) doing it. This is non-guilty spending.
There are two sides to the coin with saving and spending. If you’re going to work hard to save, you also need to learn how to be good with spending.
I’m a saver, so it’s easy to find myself watching this account build up but I love that feeling of being ok with spending it on whatever I want without feeling bad.
Caution: If you’re in debt up to your eyeballs paying interest on credit cards, you’re going to have to ditch this account until it’s paid off.
Jar #5 – Tithing/Give (10%)
I believe in giving back.
If you’re in a position to pursue financial independence, you’re in a position to give back and help those who really need it.
You don’t have to be “rich” to give. Even if you give a small amount, it will bring you more joy because it’s doing the right thing.
This may be hard for some people to do, but I found through giving, that I can’t afford not to give.
I don’t think about the money as my money. 10% of my money to give and help others is not a big deal considering how much I’ve been given.
Jar #6 – Education (10%)
If you’re in college, use this money to pay for school. If you are not in college, invest in yourself by learning about non-traditional ways to improve your personal skills, business, marriage, or your health.
Never stop learning.
Millionaires spend a good amount of money investing in themselves, which is an investment that will pay the greatest dividends.
You could also use the money in this jar to fund your children’s future college expenses in a 529 college savings account for example.
How to implement the jars money management system
As I mentioned at the beginning, cash can become a hassle. So we decided to move this system online.
My wife and I deposit all of our personal income into our necessity checking account each time we’re paid.
The money in our necessity account pays for all of our expenses. And the remaining money is distributed into five savings accounts.
If you have a money management system that has worked for you, I’m not saying you have to completely switch. You can customize it to your liking.
But, if you’re young, and you implement this, it will have a big impact on your financial future.
Once you get the basic cash management system down I recommend you find a bank or a credit union that will allow you to have multiple savings accounts with no fees and open digital jars.
“Money doesn’t buy happiness, but it can buy FREEDOM: freedom of choice, to be able to do what you enjoy doing and not be forced to do things just because you need the money.”
A question I get when people learn about this is, “this sounds great, but how am I supposed to live on half of my income?”
It may be difficult at first, but what you’re doing it setting yourself up to be financially free and it requires a lot of sacrifice and discipline.
Everyone has to live like a broke college student at some point in life. You can have the life you want if you put in the work necessary to achieve it.
If you stick with this for a long period of time you will eventually reach financial independence.
So, go to the store, or your pantry, grab some jars, and start this today! You’ll find right away how much freedom and wealth you already have.
I highly recommend the Jars Money Management System to anyone who wants to make the most out of their money. If you’re looking for a simple way to budget, then start this today! Remember: Managing money doesn’t restrict freedom — it creates freedom.
If you would like more help getting started with this money management system, I put together a free course called The Transform Your Finances Email Course. The step-by-step guide you need to get started with the Jars Money Management System.
I hope you’ll sign up!
Let me know in the comments below if you’ve tried this and/or what you have done to manage your money!