Managing One’s Finances

I must admit I do not know how to manage my own money. There are several times when we run out of funds a week before the next payday comes. We seldom save up. Being with my colleagues who have been seriously into managing their finances, they told me to try “The Jar System.”

The money you are earning would be allocated for different purposes. It would be divided into 6 jars (or envelopes to be realistic). The jars are as follow:

1. Financial freedom account (FFA) – 10% of your income should be put in this jar. This can be used for investment purposes like businesses.
2. Necessities (NEC) – 55% of your income goes here. This is for the bills that needs to be paid, food, necessary clothes, etc.
3. Long term saving for spending (LTSS) – 10% of your income should be allocated for this jar. You may have more than one LTSS jar but you have to divide the 10% allocated money for the jars depending on its priority. This is to be used for the plasma TV you want, a family vacation abroad, contingency fund, kid’s tuition fees, etc.
4. Education (EDU) – 10% of your income that goes into this jar is for your own education. It can be used to attend seminars, buy books – it’s for your continuous learning.
5. Play – 10% of your income should be allocated here. This is for guilt-free fun such as dining in a fancy restaurant, massage or spa.
6. Giving (GIV) – 5% of your income should be given to charity. It my case, it goes to the church. If you want to allocate 10% for this, take off 5% on the NEC jar.

At first, one would find it difficult as one’s income is sometimes not enough for their necessities. If you only a few money, you can start by allocating a thousand peso divided between the 6 jars.

It doesn’t matter if what you put in the jar is a small amount. It’s the habit of managing the money that matters most.

Read more here.