THERE ARE DIFFERENT STROKES for different folks and today’s article presents a system of personal money management that organises your spending and investing while providing an aspect of balance in your life. This system may suit you.
For this approach, you need to divide your earnings into six different jars as follows:
1. This jar contains ten per cent of your earnings. The purpose of these funds is to advance your financial freedom (FF). Money from this jar is to be used for investments that will build your long-term wealth and ensure your eventual financial freedom. Funds from this jar are never, never to be spent on consumption. Label this the FF Jar.
2. This jar contains another ten per cent of your earnings. The money in this jar is for long-term savings and spending (LTS). You accumulate funds in this jar so that you can acquire, for example, a new car, a bigger screen TV, a family vacation, furniture and such like. You are also allowed to pay debts or even buy gifts from this jar. Label this the LTS jar.
3. This jar contains another ten per cent of your earnings. These funds are for your continuing education, exposure and development (T&D). A ready example is that if you are already at a loss about how to invest the sum accumulating in the FF jar, then the funds in this jar can be spent on books, videos, workshops or seminars which advance your understanding and comfort in dealing with investment matters. Label this the T&D jar.
4. This jar contains the biggest proportion: 55 per cent of your earnings. These funds are to be spent on everyday living expenses (EDL), like food, mortgage/rent, utilities, clothes, insurance and so on. This is where you may need to reduce your spending or to increase your earnings or find ways to achieve both in order to keep your spending from this jar within the 55 per cent range. Label this the EDL jar.
5. This jar is special. It contains ten per cent of your earnings. You are required to spend the funds in the jar on a regular basis in adding fun to your life. Say, every month or every other month, you identify and do something that you really enjoy with this money. What brings a smile to your face, laughter to your heart or plain joy to your soul? Indulge in those kinds of activities or services fully expending the money in this jar on a regular basis. These funds are accumulated in order to ensure you bring greater balance to your life. It ensures that spenders contain their spending on luxuries and savers learn to treat themselves better and enjoy life more without feeling guilty. Label this the FUN jar.
6. This jar also contains the remaining five per cent of your earnings. This money is for charitable giving, respecting a well-established ritual of wealth. By helping other people outside your family and friends’ circle, you will build a sense of contentment, with the comfort of having enough money to be in a position to help those less fortunate. This can add special meaning to your life. Label this the GIVE jar.
Envelopes, an Excel worksheet, or separate bank accounts can be used to keep track of each jar’s amount. Yet, whatever the method used to record and track your spending, applying this money management system is likely to add valuable discipline, continuing self-development and fun to your life.
• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.
