As you earn from you active income, knowing how to manage the inflow of that income is very important and today we talk about the Harv Eker Money Jar System to better manage your personal finance.
The Financial Excel Cheat Sheet article provided an excel template for your to do proper budgeting of your income and expenses. Another way is to manage your money is through the Harv Eker Money Jar System:
I think the picture is quite self-explanatory. Basically every month as you collect your salary income, you allocate it into different jars or accounts. For the expenses, you have the NEC (necessities) and LTSS (Long Term Savings for Spending) accounts.
10% should go to FFA (Financial Freedom Account). This is very crucial as this is the amount to be accumulated over time, invested and compounded as we have been discussing over many articles.
EDU account is for Education as you upgrade and enrich yourself with new skills and knowledge.
I know of people who are compulsive savers and are very disciplined to save aggressively and contribute to FFA so as to achieve financial freedom as early as possible. I do suggest a balance and that’s why the PLAY account is important. Once in a while, treat yourself to some luxury. Working towards financial freedom should be a process, enjoy the journey along the way.
And finally there is the GIVE account for you to share with others some abundance and you will find goodwill and wealth coming back to you.
I personally like this philosophy of money management but I don’t think the percentages need to be adhered to too strictly. Vary according to your situations with the principle that you want to take care of the long term fulfilment of your life dreams.
So, give it a go and have a disciplined and systematic way of personal money management.
At Journey With Money, we are practitioners of Value Investing for Singapore and US stocks. We are passionate about sharing our Stock Investment knowledge and experience. Please feel free to comment below for us to improve our articles.