The 6 Jars Rule – How to start your money management?

 

Are you dreaming of higher education? You want to start investing but don’t have enough money. Or your salary is decent, but you are struggling in saving for plan in the future. You are in university and over budget every month. Okay, these problems, which have been troubling many students and even working professionals, will be solved by money management.

The thin line between financial success and financial burden is how you control your spending and income and budget it properly. Money management seems tough at the first glance, but it will be easy-peasy if you follow the 6 Jars Rule.

You can do it using 6 jars to store cash, or 6 bank account with your money divided and flowed.

1^st Jar: Necessities (55%)

Before kickstarting any of your dream, we need food, water, electricity and accommodation to maintain our basic daily demand. 55% of your money should support you in terms of necessities. Calculate it well and use it wisely for rental fee, groceries, electricity and other utility bills. You won’t like it when you wake up 8 a.m. to keep an eye on the stock market, you realise your house have no electricity or Wi-Fi.

2^nd Jar: Long-term savings (10%)

No one can predict the future, so it is crucial for you to plan ahead your money for long-term plans such as housing purchases, marriage fund, vacation savings or unexpected medical expenses. I’m not threatening you, but you will never be sure whether your body is totally healthy or might need some medical treatment. So, it is always good to set aside 10% of your income for these plans.

3^rd Jar: Education (10%)

Learning is a never-ending journey, so if you are aspiring about higher education, better start saving now. 10% of your income for coaching, mentoring, books and upskilling courses is not a big amount, but over time, it will allow you a budget for your education and personal development.

4^th Jar: Leisure (10%)

It is a must to have a budget that you can spoil yourself and your family during weekends or even on a daily basis. 10% of your income should be your leisurely expense, giving you some relaxing moment and motivate you more in your lifetime.

5^th Jar: Financial (5%)

If you already plan for your retirement, then it is inevitable to mention investing. I know that most of our blog audience might be interested in investing and stock exchange in general, or some of you definitely had developed a career out of this field. Other types of investment such as mutual funds, real estate or even gold investments also count, as this jar will contribute to your passive income when you grow older and need financial stability.

6^th Jar: Give (5%)

The social exchange theory we learnt in university lectures taught us that besides receiving, we should give some. A small amount might be put aside for charity, volunteering activities or any types of donations. This also reminds you with gratefulness, as you wake up everyday with clean air to breath, cosy bed to rest on and enough food to be full.

In a nutshell, some of you may think, what if your income is just enough to fulfill your first jar of necessities. In this case, instead of starting with $1,000, $10,000, or your total income, let’s start with $100 first. Easy to calculate, easy to manage and this amount will slowly build your habit of money management. Once you are familiar with, raise the amount constantly until you master at managing your total income.

Habits are the compound interest of self-improvement. Start today, it’s never too late to start.

By Linh Tran.